Iceland formally applies to join European Union

[July 23, 2009]  STOCKHOLM (AP) -- Iceland's foreign minister on Thursday handed over the country's application to join the European Union, a move Icelanders hope will bring economic stability.

The small North Atlantic island, with only 320,000 residents, is expected to meet many of the membership criteria, but faces difficult negotiations over its fisheries sector, a key part of the Icelandic economy.

The independent-minded Icelanders are concerned that EU rules would give European fishing fleets access to Iceland's waters.

"To be frank with you, if we would get a rotten deal on fisheries, the Icelandic people would be quite angry," Foreign Minister Ossur Skarphedinsson said after presenting the EU application to his Swedish counterpart, Carl Bildt. Sweden currently holds the EU presidency.

"This is not only an issue of economics. It is also an emotional issue. It is also and issue related to sovereignty," said Skarphedinsson, a former fisherman.

He said he was confident the two sides would "find a solution that will be acceptable for both the existing framework of Europe and to our special needs as a nation."

In 2007, fishing employed 4 percent of Iceland's work force, just over 7,000 people. But seafood accounted for almost half of Iceland's exports and 10 percent of gross domestic product.

Iceland's parliament last week voted to seek EU membership as a way to stabilize the country's economy, which was one of the first causalities of the global recession after years of strong growth.

The EU has to approve the accession and Iceland will also hold a referendum on the issue.

Financial deregulation, a stock market boom and a surging krona helped Icelandic entrepreneurs go on a global buying spree, snapping up businesses from Britain's Hamleys toy store to the Karen Millen clothing chain. Iceland's banks drew depositors from around the world with too-good-to-be-true savings rates.

The over-stretched banks collapsed under the weight of debt amassed during the years of light regulation and retailers went bankrupt. The country's currency, the krona, has plummeted, while unemployment and inflation have spiraled.

Iceland is already part of the European Economic Area, a trading block that gives Icelanders the right to live and work in the EU while allowing the country to run its own agricultural, fishing and monetary policies.

[Associated Press; By KARL RITTER]

Associated Press writer Malin Rising contributed to this report.

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