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

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09REYKJAVIK11 | 2009-01-21 17:11 | 2011-01-13 05:37 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Reykjavik

`

    VZCZCXRO1688
    PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
    RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
    DE RUEHRK #0011/01 0211711
    ZNR UUUUU ZZH
    P 211711Z JAN 09
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 3948
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
    RUEKJCS/SECDEF WASHDC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RUEAIIA/CIA WASHDC

` `

    UNCLAS SECTION 01 OF 03 REYKJAVIK 000011

    SENSITIVE

    SIPDIS

    STATE FOR EUR/NB, INR-B
    OSLO FOR DATT
    DOD FOR OSD-P (FENTON)
    TREASURY FOR LAWRENCE NORTON AND ERIC MEYER

    E.O. 12958: N/A
    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

    REYKJAVIK 00000011  002 OF 003

    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
    -------------

    REYKJAVIK 00000011  003 OF 003

    ¶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

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