The EU is not an island that can ignore the plight of Iceland

EU member states have dented the Union?s guiding principle of solidarity by not acting collectively to help Iceland

This article was published in the European Voice on 23 October 2008.

Solidarity is the cornerstone of the EU, whose 27 member states are bound together by technical means but rely for their collaboration on something deeper – the idea that Danes and Romanians are likely to have more in common with each other than either has with, say, Iraqis.

A second sort of European solidarity is between the EU and a series of countries that enjoy privileged relations with the Union. These include countries such as Norway and Switzerland, members of the European Free Trade Association, and others in what the EU calls its “neighbourhood” such as Ukraine, with whom the strongest bond of solidarity might be developed, if only Kiev can be persuaded to adopt reforms and democratic norms.

Both types of solidarity have been crucial to advances inside the Union, such as the single market, and in allowing the EU a hand in shaping developments across the European continent, from moulding Norwegian trade standards to determining Ukraine’s electoral law. Both notions of solidarity have been thrown into sharp relief by the EU countries’ lack of enthusiasm about helping Iceland out of its financial predicament, with most European leaders preferring to deal alone with the fall-out from the financial turmoil.

The story of Iceland is perhaps the most poignant. Probably the country most affected by the current financial crisis, its commercial banks have been nationalised, its currency has taken a tumble and the stock exchange had to close for three days. Trading resumed last week, but the first day ended badly, with the OMX Iceland 15 Index down 77%. The Icelandic index has lost 89% of its value this year, making it the worst-performing stock exchange on the planet.

The initial response to Iceland’s request for help from its European neighbours was silence, pending a successful search for the right legal instruments. Prime Minister Geir Haarde then turned to Russia. Moscow could hardly contain its delight at being asked to bail out a western European country at the very moment when the EU has decided to downgrade bilateral ties because of Russia’s invasion of Georgia. If the Icelandic affair was unedifying, so was the lack of any immediate solidarity in mounting a rescue package, each EU member state, from Ireland to Germany, preferring to deal with the crisis alone – in some cases making an already bad situation worse.

As markets tumbled, the bloc had no strategic vision for how to confront the crisis, even though, in an internationalised financial market, national responses would have, at best, a limited impact. When this simple verity sank in, Europeans leaders spent last week trying to make amends. At a summit meeting (15-16 October), they rallied behind the banking rescue package agreed by the 15-nation eurozone. And under a currency swap agreement Norway and Denmark at last showed some neighbourly solidarity, each providing Iceland with €200 million.

It remains to be seen how much lasting damage has been done to European solidarity by this debacle. If EU member states run into trouble in the future, how many will believe they will be helped by their fellow EU members or by the European Central Bank? That in turn raises doubts about the value of being accorded candidate status, let alone making the necessary political and other sacrifices to join the so-called neighbourhood.

Coming on the heels of NATO’s powerlessness in the face of Russian aggression in Georgia, many eastern European countries, such as Ukraine and Serbia, but perhaps also Bulgaria – despite now being in the EU – may be tempted by a new relationship with Russia, rather than relying on empty promises of Western support. As the French government tries to find a way of persuading the Irish to reconsider their rejection of the Lisbon treaty, they might ponder ways of reinforcing the bond not only between EU member states, but also between the Union and its partners.


The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.


ECFR Alumni · Former Senior Policy Fellow

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