April 24, 2009 10:33 pm

Iceland minister warns on EU

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Any decision for Iceland to join the European Union and single currency must be taken by its people and not one political party, its finance minister said ahead of the country’s first elections since its banking system spectacularly collapsed last year.

Steingrimur Sigfusson, a member of the caretaker government which assumed power after the last was ousted by popular protest, said in an interview with the FT that the issue of EU membership was the greatest threat to a stable coalition.

Current prime minster Johanna Sigurdardottir’s Social Democrats are keen to press ahead with an application for EU membership, while Mr Sigfusson’s Left Greens – their coalition partners – remain sceptical.

“It is not for one single party to decide what the fate of Iceland should be on this issue”, he said. “So far the collaboration between the interim government has been good but of course I am concerned [over a potential split] because the Social Democrats have driven a very hard campaign on the European issue”.

Many Icelanders now feel joining the euro is their only option after the sharp fall of the krona left thousands with crippling payments on foreign currency loans. Others feel that if Iceland became part of the European club it would risk losing the sovereignty it won from Denmark in 1944.

With the country traumatised by recent events, the elections are expected to dole out a crushing blow to the conservative Independence party and install a fully leftwing government for the first time in Icelandic history.

Mr Sigfusson said that if he won the election Iceland would reject “greedy neoliberal policies” as it looked to rebuild and in their place adopt “a more normal Nordic model” of economic growth for the future.

“We want free and open markets and good relations with our trade partners but that does not mean we will drive forward with the same philosophy that has turned out to be very harmful to us,” he said.

Mr Sigfusson also confirmed that Iceland’s International Monetary Fund rescue programme would continue as planned, having been delayed after the fall of the previous administration.

“Since Febuary the programme has more or less been on track and I hope that we can now start getting the loans as was planned”.

The finance minster added that the country’s banks were close to becoming fully functional in the next two weeks, and that the current government had not ruled out allowing creditors to take a stake in the rebuilt banks.

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