Iceland's EU accession prospects must not become entangled in dispute over Icesave

3.44.21pm GMT Fri 15th Jan 2010

Liberal and Centre Parties from the Nordic Council and European Parliament met in Brussels this week to seek solutions to Iceland's accession prospects amidst a national political crisis on how to meet debt obligations arising from the Icesave investor dispute.

There is widespread opposition to Icelandic Government plans for an outline deal to compensate the UK and Dutch governments for bailing out investors who had lost their savings last year when the Icelandic banking crisis forced the bankruptcy of several leading banks operating in the European Union. Following a Presidential veto of the draft law, the crisis is now coming to a head in Iceland and is likely to result in a public referendum sometime before the first week of March. Half of the Icelandic Parliament and up to a quarter of Icelandic voters have registered their opposition to current plans which would leave each household with a debt of up to €12,000.

"Although the issue of Icesave and EU accession are two separate matters, it is inevitable that they will become politically intertwined," said Diana Wallis MEP, (UK, Lib Dem) EP vice-president. "The Icesave issue is turning people off EU membership. We should be looking for constructive solutions to help a prospective Member State out of the current crisis rather than passively leaving two Member States to resolve it alone."

"There is clearly scope for a solution to be found in the terms of repayment, in the levels of interest and exchange rates and in a possible review clause if the Icelandic economy does not recover soon. A mediator, possibly from a neutral country with experience in the financial sector such as Switzerland, may have to be brought in if the parties concerned cannot reach agreement independently."

Photo shows Diana with Pat 'the Cope' Gallagher (Chair, European Parliament's delegation to Iceland) and Siv Friðleifsdóttir, an Icelandic MP with the Liberal Democrats' sister party there (Framsóknarflokkurinn)