Iceland is heavily integrated into the European Union via the Agreement on the European Economic Area and the Schengen Agreement, despite its status as a non-EU member state. Iceland applied for membership in 2009, but the Minister for Foreign Affairs sent a letter in 2015 that ended the application process. The application was never formally withdrawn, and the accession process remained dormant until 2024, when a new government revived the question of EU membership. A referendum was held on 29 August 2026 and was defeated; had it passed, it would have provided a mandate to restart negotiations, with any final accession agreement requiring a separate vote.
Comparison Population 449,206,579 390,433 Area 102,775 km2 (39,682 sq mi) Population density 104/km2 (269/sq mi) 3.79/km2 (9.84/sq mi) Capital Brussels (de facto) Reykjavík Global citiesCities ranked "alpha" in 2020 by the Globalization and World Cities Research Network. https://www.lboro.ac.uk/gawc/world2020t.html Amsterdam, Berlin, Brussels, Dublin, Frankfurt, Lisbon, Luxembourg, Madrid, Milan, Munich, Paris, Prague, Rome, Stockholm, Vienna, Warsaw None Government Supranational parliamentary democracy based on the European treaties Unitary parliamentary republic Current leaders Official languages 24 official languages Icelandic Main religions72% Christianity 48% Catholic Church 12% Protestantism 8% Eastern Orthodoxy 4% Other Christianity 23% Non-religious 3% Other 2% Islam63.47% Church of Iceland (Protestant) 2.75% Free Lutheran Church in Reykjavík 1.98% Free Lutheran Church in Hafnarfjörður 0.89% Independent Lutheran Congregation 4.02% Catholic Church 2.05% Other Christian denominations 1.31% 0.96% Zuism 0.42% Buddhism 0.35% Islam 14.30% Other and unspecified 7.17% Unaffiliated Ethnic groups Germans (c. 83 million), French (c. 67 million) Italians (c. 60 million) Spanish (c. 47 million) Poles (c. 46 million) Romanians (c. 16 million) Dutch (c. 13 million) Greek (c. 11 million) Portuguese (c. 11 million) and others89% Icelanders 5% Poles 1% Lithuanians 5% others GDP (nominal) $16.477 trillion, $31,801 per capita $27 billion, $75,700 per capita
Integration
Iceland is a member of the European Free Trade Association (EFTA), a grouping of four non-EU European countries, and is also part of the European Economic Area (EEA). Through the EEA, Iceland participates with a non-voting status in certain EU agencies and programmes, including enterprise, environment, education (including the Erasmus Programme) and research programs. Iceland also contributes funds to "social and economic cohesion" in the EU/EEA.Iceland, EEAS Iceland also frequently consults the EU on foreign affairs and frequently aligns itself to EU foreign policy. Iceland also participates in EU civilian peacekeeping missions.Iceland´s home is in Europe, Icelandic Ministry of Foreign Affairs
Iceland is a member of the Nordic Passport Union and the Schengen Area, which now is under EU law, as a non-voting participant. Iceland's participation in the Schengen Area allows free movement of people between Iceland and the rest of the Schengen Area. Several thousand Icelanders travel to and study or work in the EU. A large majority of foreigners in Iceland come from the EU. Iceland is also associated with the Dublin Convention on justice and home affairs cooperation. Iceland also has links to several EU member states through its membership of the Nordic Council.
Use of the euro During the 2008–2011 Icelandic financial crisis, instability in the Icelandic króna led to discussion in Iceland about adopting the euro. However, Jürgen Stark, a member of the executive board of the European Central Bank, has stated that "Iceland would not be able to adopt the EU currency without first becoming a member of the EU". As of the ECB's May 2012 convergence report, Iceland did not meet any of the convergence criteria. One year later, the country managed to comply with the deficit criteria and had begun to decrease its debt-to-GDP ratio, but still suffered from elevated HICP inflation and long-term governmental interest rates.
Reasons for Iceland's non-membership of the European Union Academics have proposed several explanations for why Iceland has not joined the European Union: The importance of the fishing industry to Iceland's economy and the perception that EU membership (and its Common Fisheries Policy) will have an adverse effect on the fishing industry. The perception that EU membership will have an adverse effect on Iceland's agricultural sector. Iceland's strong ties with the United States, which included significant economic, diplomatic and military assistance, decreased Iceland's dependence on European countries. The victories in the Cod Wars (1958-1976) may have strengthened Icelandic nationalism and boosted the perception that Iceland can succeed through unilateral or bilateral means rather than compromise in multilateral frameworks. The Icelandic electoral system favors rural areas, which are more eurosceptic. The tendency for Icelandic elites to pursue education in the United States or eurosceptic European countries (such as the United Kingdom or the Nordic countries), and to cooperate more closely with political elites from those countries. Icelandic nationalism and the legacy of Iceland's struggle for national sovereignty. The impact of the Icesave dispute with the Netherlands and the UK.
Trade relations
Economic relations between Iceland and the European Union are primarily governed by two agreements: a bilateral free trade agreement signed in 1972 and the agreement on the EEA signed in 1992. The EEA was established to give Iceland, among other European countries outside the EU, access to the EU market. Iceland's access to the EU market in respect of agriculture and fisheries is dealt with by separate bilateral agreements. Iceland is legally bound to implement into its own law all EU directives applicable to the free movement of goods, persons, services and capital. This is complemented by regular meetings between EU and Icelandic officials, including a twice-yearly meeting of EEA foreign ministers.Iceland, European Commission
+Icelandic-European tradeTrade Policy - Iceland , European CommissionDirection of tradeGoods (2016)Services (2016)Investment (2016)EU to Iceland€2.9 billion€1.4 billion€8.5 billionIceland to EU€3.6 billion€1.2 billion€-0.8 billion
78% of Iceland's exports went to the EU and 52% of Iceland's imports came from it, making the EU Iceland's most important trading partner, followed by Norway. Traditionally, Iceland's economy has focused on fisheries and renewable energy (primarily hydroelectricity and geothermal energy - see energy in Iceland for more details), but it has been diversifying into aluminium production, pharmaceuticals, information technologies, tourism and the financial sector. Iceland is still a large exporter of fish (the third largest exporter to the EU after Norway and China) with a world trade surplus of €1.1 billion in 2008. In fisheries, the EU had a 2009 trade deficit of €879 million. Until the 2008–2011 Icelandic financial crisis, its commercial services sector had been growing rapidly, accounting for almost 35% of total exports (goods and services combined).
Accession of Iceland to the European Union
Iceland applied to join the European Union on 16 July 2009 and formal negotiations began on 27 July 2010.Timeline of events – Iceland's application for membership of the EU, Icelandic Ministry for Foreign Affairs However, on 13 September 2013 the Government of Iceland dissolved its accession team and suspended its application to join the EU. On 12 March 2015, Foreign Minister of Iceland Gunnar Bragi Sveinsson stated that he had sent a letter to the EU withdrawing the application for membership, without the approval of the Althing, though the European Union stated that Iceland had not formally withdrawn the application.RÚV, Application not formally withdrawn
If negotiations were to resume, Iceland would face controversial issues on fisheries which could potentially derail an agreement, despite already being a member of the European Economic Area, which excludes fishery. If an agreement were to be concluded, the accession treaty would be subject to a national referendum in Iceland and require ratification by every EU state.National Referendum – Iceland's application for membership of the EU, Icelandic Ministry for Foreign Affairs
Pre-2008 opinion
From 1995 to 2007 the government coalition of the conservative Independence Party (Sjálfstæðisflokkurinn) and the conservative Progressive Party (Framsóknarflokkurinn), opposed joining the EU, while the opposition Social Democratic Alliance (Samfylkingin) supported membership negotiations. In 1994, the Social Democratic Party (Alþýðuflokkurinn) became the first Icelandic political party to include the intention to apply to join the EU in its policy statement. Despite this hostility towards EU membership, the Independence Party was forced to accept some of the constraints associated with participation in the European project. Iceland sought shelter provided by the EEA, EFTA and Schengen because non-membership of the EEA and EFTA would have threatened its key economic interests, and non-membership of Schengen would have imposed burdens on Icelandic individuals.
Former Prime Minister Halldór Ásgrímsson predicted on 8 February 2006 that the country would join the EU by 2015. He added that the decisive factor would be the future and the size of the Eurozone, especially whether Denmark, Sweden and the UK would have adopted the euro or not.Rettman, Andrew (9 February 2006). Iceland in EU by 2015, prime minister says. EU Observer. His prediction received some criticism, not the least from people within his own government.Prime Minister Ásgrímsson as good as alone in his predictions. EU related news from Iceland, 14 February 2006
Another former Prime Minister, Geir Haarde, has on a number of occasions stated his opposition to EU membership, both as Foreign Minister under Halldór Ásgrímsson and after taking office as Prime Minister. In response to Halldór Ásgrímsson's earlier prediction, Haarde said, "I don't share that point of view. Our policy is not to join in the foreseeable future. We are not even exploring membership." In a speech at a conference at the University of Iceland on 31 March 2006, Geir Haarde repeated what he had said on a number of occasions—that no special Icelandic interests demanded membership of the EU. In the same speech he further explained in detail why it would not be in the interest of Iceland to adopt the euro.. Team. 2 May 2007
Following the 2007 election, the Independence Party and the Social Democratic Alliance formed a new coalition with a policy of not applying for membership, but setting up a special committee to monitor the development within the EU and suggest ways to respond to that.Iceland Mulls EU Membership, DW-World, 24 May 2007
Due to Iceland's limited currency, the government has explored the possibility of adopting the euro without joining the European Union. The EU, however, says that Iceland cannot join the Economic and Monetary Union (EMU) without becoming a full EU member state (all other non-EU states that use the euro do so because they previously used a member state currency that was replaced by the euro).
Effect of 2008 financial crisis
At a meeting of members of his party on 17 May 2008, Geir Haarde said that in his opinion the cost of joining the EU outweighed the benefits, and therefore he was not in favour of membership.Geir: Ég vil ekki ganga í ESB. Mbl.is 17 May 2008 However, in October 2008, during talks to repatriate a portion of Iceland's foreign invested pension funds—Iceland having been particularly affected by the 2008 financial crisis—the unions demanded that Iceland apply for EU membership in return for wage restraint.Iceland moves to shore up economy. BBC News. 5 October 2008