They’re now speaking about fast-tracking a referendum on reopening EU accession talks in Iceland, presumably as early as this yr, accelerating a timeline that was initially anticipated nearer to 2027. The shift is being pushed by geopolitical tensions, financial pressures, and a rising debate about adopting the euro versus preserving the krona.
What folks continually fail to grasp is that the euro was by no means created as an financial mission first. It was a political mission. I’ve acknowledged numerous occasions that the euro was designed to bind Europe collectively politically after centuries of battle, not as a result of it made financial sense for various economies to share a single foreign money. You can not unify Germany, Italy, Greece, and Spain underneath one financial coverage and anticipate stability. That violates the very basis of capital stream dynamics and financial cycles. The euro eliminated nationwide financial sovereignty and handed it to a central forms in Brussels and Frankfurt that can’t reply to native financial circumstances.
Now we see Iceland, a rustic of roughly 390,000 folks, being pulled again into this identical dialogue. That is extremely ironic once you have a look at the precise historical past. Iceland utilized to affix the EU in 2009 within the aftermath of the banking disaster however halted negotiations in 2013 after public opposition and issues over sovereignty, fisheries, and financial independence. It was a direct reflection of the truth that smaller, impartial economies perceive the hazard of surrendering coverage management to a centralized authority.
Iceland has one of many highest GDP per capita ranges on this planet, runs on ample geothermal and renewable power, and maintains its personal foreign money exactly so it will probably alter throughout crises. Throughout the 2008 monetary disaster, Iceland allowed its banking system to break down, imposed capital controls, and let the krona devalue. Had Iceland been on the euro, it might have confronted the identical destiny as Greece: austerity with no financial escape.
International locations with impartial currencies can devalue and recuperate. International locations contained in the euro can not. They’re trapped in a set financial regime no matter home circumstances. That’s the reason southern Europe suffered extended stagnation whereas northern Europe dominated capital flows after the euro’s creation.
Iceland already participates within the EU single market via the EEA and Schengen with out surrendering full sovereignty. In different phrases, they get commerce entry with out financial submission. Becoming a member of the EU and probably adopting the euro would alter that stability. Experiences counsel the timeline is being accelerated as a result of rising geopolitical tensions and nearer EU engagement, which confirms my long-standing view that the EU expands extra aggressively during times of world uncertainty.
Now the EU faces declining industrial competitiveness, power crises, and regulatory overreach. The concept that becoming a member of such a construction would in some way “stabilize” Iceland ignores the broader macro development of capital flight away from extremely regulated areas and into impartial jurisdictions.
If Iceland joins the EU and ultimately adopts the euro, will probably be surrendering the very software that allowed it to outlive its worst disaster. That’s the actual financial situation. Small nations traditionally do higher at retaining financial sovereignty throughout international instability. The euro is inflexible by design, and rigidity in a cyclical international economic system is at all times harmful. Sacrificing sovereignty for a political foreign money created for European unification relatively than financial effectivity could be a profound long-term structural shift, not a easy commerce resolution.
