It is no mystery why British Eurosceptics love Iceland. A bracing visit to Reykjavik is all it takes to see what the European Union could have been, if Brussels had stuck to the path of free trade and shunned ever closer union. Like pilgrims to a shrine, British Tories come to observe how Iceland enjoys the best of all worlds, thanks to its membership of the European Free Trade Association and — equally vitally — its stubborn non-membership of the EU.
Iceland enjoys the great prize Brussels has to offer: access to the EU single market. Yet Iceland is not a member of the Common Agricultural Policy. Iceland can strike its own free trade agreements with the rest of the world — unlike Britain.
Reykjavik can veto the screeds of EU laws and directives that come with single-market membership. (The veto has never been used. Instead Iceland secures occasional exemptions on the grounds that it is so small, and so far from the rest of the single marketplace.)
Before British fishermen can trawl for British fish, UK ministers have to stay up all night pleading with foreign colleagues in the airless backrooms of Brussels. Outside the Common Fisheries Policy, Iceland can take a different approach. When its seas are trespassed by foreign trawlers, Iceland has, in its day, sent out coastguard cutters with names like Thor to cut their nets, then ram them.
And here, at this stirring point, is where pro-withdrawal British Eurosceptics usually leave things. Go for a similar deal to Iceland’s, is their conclusion, and grab back our freedom. But there is a serious — and previously unreported hitch — to this plan.
The canny men who run Iceland, robust Eurosceptics all, do not actually believe that Britain could replicate their happy arrangements. They go further. They think that from the perspective of Iceland’s self-interest, a British attempt to join the cosy Efta club could be positively dangerous, like allowing an elephant into a rowing boat.
To explain why, Icelandic leaders offer a slice of history. In a nice irony, Iceland’s freedom is all thanks to Jacques Delors, and his ploy of luring Efta nations into the EU: the European Economic Area. The EEA was a honey-trap, intended to bind the Efta nations to the single market, so joining the EU would seem a logical step.
When the EEA was established in 1994 there were seven Efta nations: Iceland, Switzerland, Norway, Liechtenstein, Finland, Sweden and Austria. Switzerland refused to join the EEA, preferring bilateral deals with Brussels. But the other six did join (there are technically 28 nations in the EEA at present, as all EU member states are automatically members).
The Delors plan worked well. Before long, Sweden, Finland and Austria were all full members of the European Union. In contrast, Iceland, Norway and Liechtenstein took the honey but avoided the trap, never joining the EU.
Iceland’s most celebrated Eurosceptic, David Oddsson, does not conceal his satisfaction in an interview at the nation’s central bank, where he is chairman. Mr Oddsson — a wild-haired Thatcherite, who turned Iceland from statist backwater to free-trade powerhouse during his 13 years as prime minister — has thanked Jacques Delors in person, he grins.
If it were not for Delors and the EEA, Iceland’s anti-EU camp would never have prevailed, he explains. ‘The pressure from business to be members of the internal market would have been such that we would have lost that battle.’
Now Icelandic businesses trade inside Fortress Europe, without paying the full entry fee. ‘We are not paying our share,’ Oddsson admits cheerfully. ‘We would pay ten or 20 times more if we were in the European Union.’ Small wonder that shortly after Margaret Thatcher left office, she told Oddsson that Britain, in an ideal world, would have taken the same path as Iceland. But there is the hitch: Oddsson does not believe that path was ever open to Britain.
He recalls a conversation with the then German leader, Gerhard Schröder. ‘Schröder said to me, “[Iceland] shouldn’t try to become a member of the European Union; it’s good for you to be a member of the EEA agreement, and you are allowed to be there, because you are so small.’’’
So far, so friendly. But Schröder had a warning too, Oddsson recalls. ‘He said, “We would never tolerate a large country to be in that system.”’
Oddsson has no doubt about what the German meant. Britain leaving the EU would be a major affront, the political equivalent of a bitter divorce. ‘[The EU] would try their best to make sure it would not work, because if a country left, and it did work, it would be a humiliating example for them.’
That sort of fight between Brussels and Britain could threaten the Efta–EEA agreement itself — and thus Iceland. ‘Maybe, if [EU leaders] saw major players trying to get through [the EEA’s] small, open window, they would say, “Let’s close that window”,’ Oddsson worries.
The present prime minister, Geir Haarde, is no less robust a Eurosceptic. He simply does not believe Britain will make it into Efta. Asked if he would welcome Efta expansion, Haarde says, ‘I think Efta could be expanded, I don’t know about dramatically.’ He mentions promising talks with the Faroes (population 47,000).
‘As far as Britain is concerned, I don’t think this is a very likely prospect that you suggest, even though some people in the Eurosceptic community in Britain talk about this,’ Haarde says. Discussion over.
UK leaders could try toughing it out, and demanding a good deal. But access to the single market is a financial prize, and the EU has shown itself ruthless in charging for it when countries bigger than Iceland come asking. Norway, a giant among the other Efta tiddlers, already pays nearly as much as it would if it became an EU member, Oddsson says.
Switzerland, for all its bilateral deals, recently found itself ordered to levy a special tax on the savings of EU citizens in Swiss banks — and to send much of the proceeds to Brussels. Brussels has just ‘invited’ the Swiss to stump up extra funding for the ten new member states that joined the EU a couple of years ago: a cool £435 million over five years. The Efta–EEA trio, for their part, have agreed to cough up an extra £805 million for the same newcomers over the same period, with Norway paying the lion’s share.
Back in his top-floor office, with its sweeping views of the lunar plains outside Reykjavik, Oddsson believes that Britain will never be excused a penny of its current dues to Brussels, even out of the EU. ‘The other big players are not very happy with what the UK pays already. The pressure from the big players would be, “The UK is paying less than they should, this or that amount was handbagged from us by Mrs Thatcher.”
‘I think it would be very difficult for anyone to leave the Union and pay less — even if that were fair. Because the EU is not fair,’ says Oddsson, with a grim laugh.
Withdrawal from the EU is not impossible, of course. The ‘join-Efta’ argument is not a wholly false prospectus. But when you hear that it might not save us any money, and might even wreck the whole EEA deal, the argument suddenly sounds a lot like false comfort.
David Rennie is contributing editor of The Spectator and Europe correspondent of the Daily Telegraph.