Iceland MP: opting out of EU accession will be ‘very costly’

Iceland european unionA prevalent MP in Reykjavik has said that Iceland will suffer if the country abandons its effort to join the European Union. The comments came via MP Arni Pall Arnason, who also chairs the Icelandic Social Democratic Alliance party. He said in an interview with the Reykjavik-based website this week that by choosing ‘Plan B’ instead of following through with EU accession discussions, Icelandic workers will face a tougher job market and the quality of the country’s welfare system will decline.

He said in the interview, “We think that Plan B will entail a lot of emphasis on economic stability, on a large surplus in public finances to repay debt and on lower real exchange rate and thereby a lower purchasing power. This plan is possible but will mean a worse welfare system, lower wages and worse competitive environment than if we would join [the EU].”

He added, “A highly indebted nation cannot start using another currency unilaterally. The capital controls would move into the banks and they would refuse to move the Icelandic dollars out of the country. One of the biggest gains from using the euro is what happens immediately after the nation votes ‘yes’ in the referendum. Then foreign investors will know that Iceland will join the EU and money inflows will begin and lifting the current capital controls will be possible.”

The news comes just weeks after Iceland announced that it was suspending EU accession discussions until after national elections, which are set to take place in April. The country began the effort in 2008 following the collapse of its financial system, although the prospect has become less popular in recent years as the North Atlantic nation’s recovery continues to impress economic experts.

Comments are closed.