Viewing cable 09REYKJAVIK11, EU Accession: How Iceland might start heading to Brussels

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FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 3948
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RUEATRS/DEPT OF TREASURY WASHINGTON DC
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UNCLAS SECTION 01 OF 03 REYKJAVIK 000011 
 
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TREASURY FOR LAWRENCE NORTON AND ERIC MEYER 
 
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TAGS: PGOV PREL ECON EUN IC
SUBJECT: EU Accession: How Iceland might start heading to Brussels 
 
Ref: 08 Reykjavik 286 
 
¶1. (SBU) Summary: After the October financial crash, possible 
European Union (EU) membership and the adoption of the euro have 
become the most important political issue in Iceland. Iceland's 
political parties are wrestling with how to adjust their policies to 
accommodate this new reality (reftel). Post offers the following 
projection for the mechanics of an Icelandic decision to accede to 
the EU, assuming positive comments by EU Enlargement Commissioner 
Olli Rehn are an accurate indicator of the mood in Brussels and 
other EU capitals. End summary. 
 
General Background 
------------------ 
¶2. (U) After the October financial crash, possible European Union 
(EU) membership and the adoption of the euro have become the most 
important political issue in Iceland. Only one political party, the 
Foreign Minister's Social Democratic Alliance (SDA), is outright 
pro-EU. On January 16, the Progressive Party (PP) decided to put EU 
accession negotiations on the party agenda given certain conditions. 
 One more is likely to move in that direction at the end of January, 
namely the Prime Minister's Independence Party (IP). The Left-Green 
Movement (LGM) will most likely continue to be against EU 
membership, although it has been trying to placate voters by saying 
they would not be against holding a referendum on whether or not to 
start accession negotiations. The Liberal Party (LP) is reviewing 
the issue and will make a final decision at a party meeting in 
April. The LP has been getting little support in the polls lately 
and could be wiped out in the next elections, that is if it fails to 
garner five percent of the vote that is needed to get at least one 
Member of Parliament. 
 
January-February 2009 
Progressive Party 
--------------------- 
¶3. (SBU) On November 15, the PP central committee decided to move 
the party general meeting up to January 16-18, instead of holding it 
in the fall of 2009. The general meeting passed a proposal stating 
that Iceland should start accession negotiations with the EU, but 
offered a detailed list of conditions for Icelandic membership. 
Some of these -- particularly on the use of Icelandic natural 
resources and fisheries -- could pose challenges in talks with 
Brussels. 
 
¶4. (U) On November 17, PP Chair Gudni Agustsson resigned as chairman 
of the party and as Member of Parliament. On December 4, PP Deputy 
Chair Valgerdur Sverrisdottir said she would not seek reelection as 
Deputy Chairman and would not be a candidate for the chairmanship of 
the party either. Hence, the PP elected new leadership at the 
general meeting. The new chairman is a young political novice, 
Sigmundur David Gunnlaugsson, a former news reporter. In so doing, 
the party turned its back on representatives of the past, as the 
positions of deputy chair and secretary were also filled with 
relatively new people. 
 
¶5. (SBU) In terms of party following it is difficult to say whether 
this change in policy would have a positive or a negative support, 
because it could simultaneously turn off rural voters, yet attract 
urban voters. However, the election of the new leadership may 
revitalize the party and make a more attractive alternative to 
voters. 
 
Independence Party 
------------------ 
¶6. (U) The central committee and the parliamentary group of the IP 
decided on November 14 to move the party general meeting up to 
January 29-February 1, instead of holding it in the fall of 2009. 
The central committee and the parliamentary group also decided to 
appoint a European Committee to discuss the pros and cons of EU 
membership and reassess Iceland's position vis-a-vis the EU. The 
European Committee is supposed to conclude its work before the 
general meeting, and meeting attendees will then vote on a proposal 
stating that Iceland should start accession negotiations with the 
EU. 
 
¶7. (SBU) The party's general meeting is bound to offer heated 
debates. Most observers anticipate that the proposal on starting 
accession negotiations will be passed, however, this is not a given. 
If the proposal is struck down, the future of the current IP-SDA 
coalition is at risk of falling apart. On December 14, SDA Chair and 
Foreign Minister Ingibjorg Solrun Gisladottir strongly indicated 
that a no-vote on that front would mean that the coalition would 
break down, which would require elections to be held. The pundits do 
 
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not agree on whether the IP could handle a drastic change in EU 
policy; some say it would split the party, others say it would be 
left intact. There are three possible scenarios: 
 
Scenario 1 
The general meeting resolves that Iceland should apply for EU 
membership and start accession negotiations. The party does not 
split and probably gains back some of the loss in party support over 
the preceding months. 
 
Scenario 2 
The general meeting resolves that Iceland should apply for EU 
membership and start accession negotiations. The party splits into 
two factions: 1) The old IP that supported the EU proposal and 2) 
The home-rule style anti-EU party. The IP will lose a large share of 
its following, but would maintain the coalition with the SDA. The 
breakaway party is likely to ally with the LGM on EU membership, 
especially in the run-up to a referendum on the EU (on accession 
negotiations and/or membership). 
 
Scenario 3 
The general meeting resolves that Iceland should not apply for EU 
membership and start accession negotiations. However, the election 
on the proposal will be close. The party stays intact, but will 
probably lose some of its following over to the SDA and/or the PP. 
Given the close election, voters will see that the IP is split on 
the issue and pro-EU voters will therefore be reluctant to vote for 
the party in the next elections. Instead voters will flock to the 
SDA and PP, which are more likely to move Iceland in the direction 
of EU membership. 
 
¶8. (SBU) In terms of party leadership, Geir Haarde will most likely 
be reelected chairman despite some indications of discontent among 
the party rank-and-file. Deputy Chair Thorgerdur Katrin 
Gunnarsdottir may be challenged to her position by MP Bjarni 
Benediktsson, who is tipped to soon replace Bjorn Bjarnason as the 
Minister of Justice. 
 
February 2009 
------------- 
¶9. (U) Should the above predictions play out, there will possibly be 
three pro-EU parties in Iceland: The IP, the PP, and the SDA. All of 
them will advocate that Iceland apply for EU membership and start 
accession negotiations. 
 
February-April 2009 
------------------- 
¶10. (SBU) One of two scenarios is likely to happen: 
 
1) The government (IP-SDA coalition) drafts its objectives for 
accession negotiations, and decides to put the question of whether 
to start accession negotiations to a referendum. If passed, then the 
coalition parties present a bill in parliament on a constitutional 
amendment that would authorize ceding some of Iceland's sovereignty 
(sharing sovereignty with an international body in which Iceland has 
membership with full rights). The constitutional amendment would 
also stipulate that a referendum be held for this amendment to be 
passed. This would allow Iceland to apply for EU membership. 
Parliament passes the constitutional amendment. Then parliament 
would need to be dissolved and new elections called that would be 
held in the spring, or: 
 
2) The government (IP-SDA coalition) drafts its objectives for 
accession negotiations, The IP-SDA coalition decides to apply for EU 
membership and thus start accession negotiations. The coalition 
parties present a bill in parliament on a constitutional amendment 
that would authorize ceding some of Iceland's sovereignty (sharing 
sovereignty with an international body in which Iceland has 
membership with full rights). The constitutional amendment would 
also stipulate that a referendum be held for this amendment to be 
passed. This would allow Iceland to apply for EU membership. 
Parliament passes the constitutional amendment. Then parliament 
would need to be dissolved and new elections called that would be 
held in the spring. 
 
April/May 2009 
-------------- 
¶11. (SBU) Parliamentary elections where EU membership will be 
fiercely debated. IP-SDA government (possibly with PP participation 
or support). 
 
May/June 2009 
------------- 
 
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¶12. (SBU) Newly elected parliament passes for the second time the 
bill on the above-mentioned constitutional amendment. Accession 
negotiations between Iceland and the EU start in earnest. The 
negotiations could be concluded by October-December. 
 
December 2009-February 2010 
--------------------------- 
¶13. (SBU) When negotiations conclude, the government calls a 
referendum to vote on EU membership per the new constitutional 
amendment. The other EU member states (27 if no other country has 
joined by that time) need to approve Iceland's membership at the 
same time. 
 
July 1, 2010 
------------ 
¶14. (U) Iceland's EU membership could take effect. 
 
Comment 
------- 
¶15. (SBU) The above timeline simplifies a number of issues that are 
likely to be very contentious, both in the domestic political arena 
as well as in discussions with the European Commission and current 
EU member states. Beyond the oft-cited fisheries question, there is 
also the problem of negotiations between Iceland, Britain, the 
Netherlands, and Germany over loans to cover Icelandic bank deposit 
guarantees. Further, EU member states, already nervous about the 
economic strength of the most recent new members, may be wary of 
admitting highly indebted Iceland, years of positive comments by EU 
Enlargement Commissioner Olli Rehn notwithstanding. 
 
VAN VOORST