‘So Long, and Thanks for All the Fish’, says Iceland

March 24th, 2015
in Op Ed

by Dirk Ehnts, Econoblog101

Iceland has withdrawn its bid to access the European Union last week, as Deutsche Welle reports:

One of the main challenges for countries like Norway and Iceland in joining the EU is the Common Fisheries Policy. For nations like these, where fishing is a significant industry but where domestic demand is far smaller than production, the law poses a problem as it dictates which member states are allowed to catch what types of fish and at what amounts. Iceland has long argued that its own quota systems - which are not compatible with the EU's - are better both for business and for preserving populations. Iceland has criticized, in particular, EU quota policies that sometimes force fishermen to throw back caught fish - often dead fish - that are either too small, part of too large a catch, or simply of the wrong type.

Follow up:

This explanation is very nice, very diplomatic, and I don't buy it. I think Iceland had its share of dealings with "the Europeans" after its banks collapsed in 2008. They have also seen how nations are treated that are members of the euro zone, which was sold to the public as a fun thing - no more money changes for vacations - and now seems to be like school: lots of homework to do, a strict (female) teacher, and absolutely no fun. Mass unemployment, deflation, suicide rates more than doubled, etc.

The European Union has a governance problem. Its rules are defunct, and because they are we have a crisis. (If the rules would work, why the crisis?) Europe will have to reinvent itself, like Iceland did. The effort should be worth it, as Statistics Iceland show:

  • GDP growth: 1.9% (2014)
  • Inflation: 0.8% (2014)
  • Wage index: 6.4% (2014)
  • balance of trade: positive
  • unemployment rate: 4.4% (2014)

And, last but not least:

Total catches in February 2015, tonnes 222,804

To sum it up: Iceland is a macroeconomic success story, because even though GDP is still significantly lower than in 2007, the country shows some good enough growth, low unemployment and has no problem with the current account. The idea that countries inside the euro zone weather financial crises better than those outside must be discarded. It seems that the Icelandic people see very little on the table that could be of advantage, so maybe this fish was the most important issue after all.

N.B.: Douglas Adams, who wrote fiction and has a book with the same title as this post, has died recently.

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