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### Viewing cable 08REYKJAVIK286, Iceland: Political parties considering EU membership as

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08REYKJAVIK286 | 2008-12-05 16:04 | 2011-01-13 05:05 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Reykjavik

`

    VZCZCXRO9749
    PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
    RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
    DE RUEHRK #0286/01 3401628
    ZNR UUUUU ZZH
    P 051628Z DEC 08
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 3912
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

` `

    UNCLAS SECTION 01 OF 03 REYKJAVIK 000286

    SIPDIS

    SENSITIVE

    E.O. 12958: N/A
    TAGS: PGOV PREL ECON EUN IC
    SUBJECT: Iceland: Political parties considering EU membership as
    economic salve

    Ref:  Reykjavik 267

    ¶1.  (U) Summary:  Iceland's economic crisis has radically changed
    opinions here on the possibility of joining the European Union, and
    the country's political parties are struggling to adapt.  Polls show
    support for joining the EU and adopting the euro reaching 70
    percent, while support for the government has fallen below 50
    percent.  Apart from the Foreign Minister's (pro-EU) Social
    Democratic Alliance, all other parties are debating whether and how
    to add EU membership to their platforms.  For the Prime Minister's
    Independence Party, fears of a formal split are running high, while
    in the opposition Progressives, the iconic chairman of the party has
    already resigned over the issue.  Even the staunchly nationalist
    Left-Greens are rethinking their views to retain their base of youth
    support.  Decisive party congresses for the IP and PP are slated for
    January 2009, meaning that even if new (anti-EU) parties do not
    emerge, Iceland will have a dramatically reshaped political
    landscape by next spring.  End summary.

    ¶2.  (U) The debate on the merits of joining the European Union (EU)
    has become increasingly pronounced after the global credit crunch
    hit Iceland, the currency devalued sharply and the government
    nationalized the country's three major banks in October. Opinion
    polls in the last month show 60-70 percent of respondents in favor
    of EU accession, and similar support for adopting the euro. Compared
    with polls last year, support for membership has increased about
    15-25 percentage points.  In the business community, support for EU
    membership is even stronger, with almost all holding to the view
    that Iceland's road to salvation will only run through Brussels and
    adoption of the euro (reftel).

    ¶3.  (U) Olli Rehn, the European Commissioner for Enlargement, has
    frequently been asked over the past couple of years how long it
    would take Iceland to become an EU member after filing the
    application. His answers have always been positive, and in the past
    several weeks, the media has placed more emphasis on his comments in
    light of the financial crisis and speculations regarding Iceland's
    possible EU membership. Rehn has stated that the European Economic
    Area (EEA) agreement would serve as a shortcut in accession
    negotiations for Iceland. He has also said that Iceland could well
    compete with Croatia for becoming the twenty-eighth member of the
    union, which suggests that Iceland could become a member no later
    than 2011, if Iceland decided to apply for membership soon.  In
    addition, various EU officials have made it clear that if Iceland
    wants to adopt the euro, it has to become a member of the EU first.

    ¶4.  (U) Against this backdrop, Iceland's political parties -- both
    government and opposition -- are scrambling to adapt their policies
    on EU membership for Iceland.  For some (Independence and
    Left-Greens), this is a fundamental change in orthodoxy, while for
    others (Social Democrats and Progressives) a move to Brussels will
    simply confirm or codify existing trends.

    The Government -- divided over EU membership
    --------------------------------------------

    ¶5.  (U) Prime Minister Haarde's Independence Party (IP) has been the
    largest party in Iceland and a participant in most governments since
    the establishment of the republic in 1944. As such, it has virtually
    dictated Icelandic foreign policy, been a fervent advocate of NATO
    membership and strong transatlantic ties, yet been skeptical about
    European integration. The IP still maintains this position, but
    after the financial crisis hit Iceland, many party members
    (including the IP Vice Chair and at least one other minister) have
    come forth and said that the party should reconsider its position
    towards joining the EU and adopting the euro. Notably, even Minister
    of Fisheries and Agriculture Einar K. Gudfinnsson said in an October
    interview that all possibilities should be considered at this time,
    although he also reiterated his opposition to EU membership. (Note:
    Gudfinnsson is one of the strongest historical opponents of joining
    the EU, in part due to concerns over the EU's Common Fisheries and
    Agriculture Policies.  End note.)  These calls reflect the IP's
    strong support among the business community, which has already made
    clear its desire to abandon the Icelandic krona for another currency
    (with the euro the most likely candidate).

    ¶6.  (SBU) On November 14, the IP leadership made a historic and
    significant decision when they announced that they had appointed a
    committee to discuss EU membership, and that the results would be
    presented to the party general meeting, which will be held in
    January next year (vice October 2009 as previously scheduled).
    Several days before this announcement, the IP's General Secretary
    told PolOff that the party recognized the need to respond to growing
    public support for EU membership, but that the result would have to
    be something "credible" in order for the IP to regain public
    support.  With leadership elections also on the agenda in January,
    the party meeting could develop into a true showdown over the IP's
    future course.  Many fear the result will be a split or large-scale
    defections by the anti-EU group; Central Bank Chair (and former
    Prime Minister and IP Chairman) David Oddsson gave credence to these

    REYKJAVIK 00000286  002 OF 003

    fears with a November 30 interview in a Danish newspaper where he
    said he would re-enter politics should he be fired from the Central
    Bank.

    ¶7.  (U) The other member of the governing coalition, Foreign
    Minister Gisladottir's Social Democratic Alliance (SDA), is the only
    political party whose platform openly calls for EU membership.
    However, prior to the economic crisis, polls showed most Icelandic
    voters as skeptical towards EU membership, leading the SDA to
    minimize this plank.  In the changed conditions here, however, the
    SDA is now well prepared for the EU membership debate ahead given
    its long-standing pro-EU policy. The SDA firmly believes that EU
    membership is vital for Iceland to reach and maintain economic
    stability in the long run.  FM Gisladottir and other SDA ministers
    have used the crisis as an opportunity to make these points
    forcefully, at times even doing so while sharing a press conference
    podium with PM Haarde.

    The Opposition: Coalescing around an EU bid?
    --------------------------------------------
    ¶8.  (SBU) Like the IP, the Left-Green Movement (LGM) has always been
    an anti-EU party. The LGM emphasizes an independent Icelandic
    foreign policy that maintains the sovereignty of Iceland and
    supports all means of establishing global peace. The party rejects
    participation in the EU and emphasizes simple, bilateral treaties
    concerning trade and co-operation. However, due to the economic
    situation and polls showing that a number of LGM voters also favor
    EU membership and adoption of the euro, the LGM may need to adapt
    itself to the current situation.  This is not entirely new -- the
    party's Deputy Chair told PolOff in spring 2008 that as the krona
    grew weaker, many in the party were concluding that EU membership
    might be the only realistic choice.  Despite LGM Chair Steingrimur
    Sigfusson's visceral opposition to EU membership, signs suggest he
    may be increasingly isolated.  At the outset of the crisis in
    October, the youth wing of the party announced it was formulating a
    new policy on the EU instead of simply copying the policy of the
    mother party. Even one of Sigfusson's longtime ideological allies,
    Chairman of the LGM parliamentary group Ogmundur Jonasson, said that
    the party will soon discuss the possibility of putting EU accession
    talks on the agenda and holding a referendum on EU membership
    (despite also reiterating his personal opposition to EU
    membership).

    ¶9.  (SBU) For the Progressive Party (PP), the EU membership debate
    has sparked the third leadership crisis in just over two years.
    Former Prime Minister and Chair of the Progressive Party (PP)
    Halldor Asgrimsson tried to modernize the traditionally agrarian
    party by appealing to urban voters, and flirting with a more pro-EU
    policy. Asgrimsson's strategy failed, as confirmed by stinging
    losses in 2006's municipal elections and 2007's parliamentary
    elections.  After the 2007 defeat, former Minister of Agriculture
    Gudni Agustsson took over as party chair, and unsuccessfully
    attempted to gain support by reverting to a more traditional PP
    policy appealing to rural interests.  As calls here to consider
    joining the EU increased, internal tensions came to a head at a
    biannual meeting of the party's central committee on November 15,
    where the party's youth wing led harsh criticism of the leadership
    and called for EU accession to be clearly placed on the party's
    agenda. The party moved up its general meeting to January to vote on
    new leadership and the EU question. Two days later, PP Chair
    Agustsson stunned political circles by announcing his resignation as
    chairman and MP, saying he was stepping aside to allow the party to
    reconcile and move ahead. Agustsson's resignation clears the biggest
    hurdle to a solid pro-EU position for the PP.  Most believe that the
    party is desperately in need of new, younger leadership, though no
    strong candidates have emerged thus far.  However, a reinvented,
    solidly pro-EU Progressive Party might be a more attractive
    coalition possibility for the SDA, should the current government
    crumble.

    ¶10.  (U) The current stance of the Liberal Party (LP) is a bit
    murkier compared to the other parties, but given that it is an
    idiosyncratic party founded on one issue --opposition to the current
    system of fisheries management --the party is wary of EU membership
    as long as its Common Fisheries Policy remains unchanged. The party
    is currently gauging the views of party members towards the EU and
    is expected to update its policy platform accordingly.

    ¶11.  (SBU) Comment:  By putting possible EU membership on their
    agendas, the parties are now trying to adapt their policies to
    reflect public will and grab more of what looks like a very volatile
    electorate. While a larger share of voters wants to drop the
    Icelandic krona and adopt the euro as soon as possible, control over
    fishing grounds is still seen as an integral part of the Icelandic
    independence struggle and economic sovereignty. The IP and the PP
    seem to have realized that sacrificing this sacred cow, as well as
    agriculture, may be a necessary evil in order to stabilize the
    Icelandic economy for the long run. If the old guard holds sway
    among the Left-Greens, they may turn out to be the only remaining
    anti-EU party, and might attract a new base of anti-EU voters.

    REYKJAVIK 00000286  003 OF 003

    However, a more likely scenario might be the emergence of new
    centrist or center-right parties based on opposition to EU
    membership, particularly if the IP meeting in January turns bitter.
    Regardless, by next spring we will likely see a wholescale
    realignment of the political spectrum here.  End Comment.

    VAN VOORST

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