Capital controls and Iceland’s application for EU membership
Free flow of capital is one of the four freedom pillars on which the European Union rests. A country with capital controls cannot become a member of the European union. Ossur Skarphedinsson Iceland’s minister of foreign affairs is wholly aware of the problem the capital controls cause. And it is also clear to Stefan Füle EU’s commissioner for enlargement, both of whom I interviewed in Brussels Tuesday following the EU and Iceland 8th intergovernmental conference on accession.
The EU negotiations are going well. Six negotiation chapters were opened this time, one was provisionally closed. In total 27 out of 33 chapters have now been opened and 11 are provisionally closed. The negotiation is moving beyond matters included in the European Economic Area. One chapter now opened concerns the environment where Iceland has stated 14 topics of particular interest. One of them is whaling, which arouses heat and passion on both sides of the negotiation table. Skarphedinsson, holding a folder made of seal skin, underlined that whaling is not of much economic interest to Icelanders but was of cultural importance, as is seal hunting and gathering eiderdown from the eiders.
However, no matter how well the negotiations proceed the capital controls are well and firmly in the way of membership. In September, an ad hoc working group was set up, with Icelandic civil servants and representatives from the IMF, the ECB and the EU Commission, from Directorate General for Economic and Financial Affairs and from DG Enlargement. This group will now work together with the Icelandic Central Bank to find a viable way to abolish the capital control. Or, as Skarphedinsson said, the best brains in this field will now be working to solve this problem.
There is continuous political rumbling in the Althing, among eurosceptics, against the negotiations. It was probably no coincidence that today, on the day of a successful intergovernmental conference, MPs in the Althing foreign affairs committee discussed putting up for a vote that the negotiations should be stopped until the nation had voted on continuing the negotiation or not. The coalition Government is, and has been from the beginning, split on this issue with the social democrats in favour of joining the EU and the Left-Green against.
Among other access-negotiating countries voting on membership negotiations is unprecedented. It remains to be seen if there really is a political will to stop a democratic process, which will end with a referendum on a negotiated treaty. This is not the first time these voices are heard among the MPs. It is not clear if or how the matter will be pursued by eurosceptic MPs.
Another aspect of the capital controls is how to pay out creditors of the two collapsed banks, Glitnir and Kaupthing. It is fair to say that these two banks are the core of the biggest wrestle of assets there ever has been in Iceland. But that is another story for another day and another blog.
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“Free flow of capital is one of the four freedom pillars on which the European Union rest”
Yeah! free flow of capital from the poor to the rich.
Indeed the rich Germans or Americans or rich X sold poor Greeks armaments (4th armaments budget in the world)
Please do not forget the free flow of capital which until 2006 caused the variation in the value of the Krona or it’s rate of interest and therefore fueled the misalocation of capital by deregulated bankers.
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