Iceland’s No Could Be Europe’s Gain
The EU should strengthen its capacity to act before admitting new members with the power to obstruct closer integration. A commentary by Lorenzo Bini Smaghi
Iceland’s vote against reopening negotiations on European Union membership has been interpreted by many commentators and politicians as a failure for Europe.
According to the Financial Times, “The vote is a setback for the EU and its ability to act as a pole of attraction in an unstable world. The rejection is a blow to the EU’s ambitions to exert influence in the Arctic.”
In short, the Union lacks appeal. Economically, it is unattractive, particularly to wealthier countries that would be net contributors. Politically, it offers little attraction either, given Europe’s limited influence in the current geopolitical environment.
At least two closely connected conclusions follow. First, until the Union addresses the reasons for its lack of appeal, it will struggle to expand, particularly to more advanced economies. Second, enlargement does not necessarily help resolve those problems. It may even compound them.
In other words, perhaps it is a good thing that Iceland will not be joining the European Union, at least for a while.
Economically, the accession of countries such as Iceland, which already belongs to the European Economic Area alongside Norway, would change little, at least for the Union. The country already applies European regulations and makes a financial contribution in exchange for access to the European market.
What would change, however, is the prospect of deeper integration in areas beyond the scope of the single market, as advocated in the Letta and Draghi reports, particularly energy, telecommunications, finance and defence, as well as taxation. Integration in these sectors is held back precisely by member states’ determination to retain separate national rules and powers, and to preserve their vetoes to extract advantages at others’ expense.
Finance is a case in point. Small states with lower taxes and lighter regulation tend to oppose integration so that they can use measures that distort competition to attract businesses and capital from elsewhere in the Union.
Who can guarantee that, once inside the EU, Iceland would not use its veto to slow or halt the painstaking work of recent years to achieve greater financial integration and strengthen the European market supervisor?
Who can guarantee that Iceland would not use its veto to promote tax arrangements for multinational companies that distort competition, perhaps competing with countries such as Ireland?
Politically, EU membership could strengthen Iceland’s security guarantees, not least in view of growing US aggressiveness towards the region. The Icelandic government had to summon the US ambassador to protest against a map recently published on Truth Social, Trump’s social media platform, depicting Iceland, along with Canada and Greenland, as part of the United States.
Yet Europe is a political actor whose international role falls short of its weight. Often paralysed and ineffective on the world stage, it has limited capacity to act. What is the point of belonging to the Union if it cannot act in its members’ interests?
Here, too, the question is legitimate. But it is equally legitimate to ask whether, at a time when Europe is seeking to strengthen its political role in foreign policy and common defence, it makes sense to admit countries that have no intention of giving up their vetoes and whose interests are shaped to a considerable extent by their geographical location.
Admitting new members before sufficient progress has been made in strengthening the Union’s decision-making capacity risks slowing the process of unification even further.
The debate over deepening versus widening the Union cannot be avoided, particularly in the new geopolitical context.
Admitting more countries at a time when the aim is to deepen integration and overcome national resistance to building European sovereignty risks being a serious mistake. Iceland’s No vote should therefore be welcomed. Europe should have discouraged a Yes.
The only inexplicable aspect of the referendum result is the jubilation of national sovereignty advocates. Evidently, they have failed to grasp that the more countries join, the harder it becomes to build a federal Europe.
A previous version of this article was published in the Italian daily Il Foglio
IEP Bocconi does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
