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Saving Iceland

DW staff (dc)October 21, 2008

Iceland could get on the fast track to EU membership if it so desires, EU Enlargment Commissioner Olli Rehn said Monday. Iceland is considering joining the bloc to shore up its battered economy.

Safety in numbers -- Iceland is rethinking its relationship to EuropeImage: European Communities

With Iceland still scrambling to recover from an economic collapse in the wake of the global financial crisis, Rehn has made it clear that the European Union is waiting with open arms to welcome the tiny island nation should it want to become a member of the bloc.

"Iceland is clearly a democratic European country," which has "already negotiated perhaps two-thirds" of the criteria needed to join the bloc, he told news agency AFP. "This means that were Iceland to pose its candidature, we could quickly complete the negotiations."

As a member of the European Free Trade Association (EFTA) and the European Economic Area (EEA), Iceland can participate in the common market. But it has resisted joining the EU over fears that it would lose control of its fisheries.

Since Iceland's economy and currency collapsed under the weight of the global financial crisis, though, it's been casting around for several lifelines -- one of which is EU membership.

Even well-known EU skeptic, Einar Gudfinnsson, Iceland's fisheries minister, is rethinking his country's relationship with the EU.

"Everyone knows that I am against EU membership," he said in a radio interview. "But today, we should think about these questions in a new light."

Inching closer to IMF deal

Another lifeline -- in the form of a rescue package from the International Monetary Fund (IMF) -- also looks increasingly likely for Iceland. On Monday, the Financial Times reported that Iceland would soon announce a 4.5-billion-euro ($6 billion) plan sponsored by the IMF and several central banks.

The IMF would contribute $1 billion, while central banks from the Nordic region and Japan would chip in the rest of the relief package, the paper said.

Over the weekend, six Icelandic cabinet members discussed possible terms of a loan from the IMF. Commerce Minister Bjorgvin Sigurdsson was quoted as telling the Frettabladid newspaper that there was need for a quick solution.

Another cabinet member, Industry Minister Ossur Skarphedinsson, said that a deal with the IMF would help pave the way for loans from other sources.

Prime Minister Geir Haarde has said he hoped for an announcement this week.