Warming up for the EU. Iceland and European Integration

Table of Contents

1. Introduction

2. Theoretical Framework and Methodological Approach
2.1 Development of European Integration: Why States Seek EU Membership
2.2 Why States Give up Sovereignty: the Broad Field of European Integration Theory
2.3 Social Constructivism and the Construction of Identities
2.3.1 “We”: Iceland and Norden
2.3.2 “We”: the Icelandic Nation-State
2.4 Small States and European Integration
2.5 The Political Elites and Continuity and Change in Nation-State Identity
2.6 EU Membership and the Diffusion of Norms
2.7 Methodological Approach

3. The Icelandic Nation-state
3.1 A Short Historical and Geo-demographical Introduction
3.2 The Icelandic Political System
3.3 The Icelandic Economy

4. Iceland in European Associations
4.1 EFTA: Approaching the Union in Economic Terms
4.2 EEA: Accepting 80 Percent of EU Legislation - Why Not Join The EU Instead?
4.3 Schengen: Deeply Involved in the European Project - Still No EU Application

5. Contemplating EU Membership: The Years 2008-2009
5.1 Economic Factors Leading to the Reconsideration of the Icelandic Social Order
5.2 Domestic Factors Leading to the Reconsideration of the Icelandic Social Order
5.3 Government Constellations in Flux: The Social Democrat’s Way to Power
5.4 Parliamentary Elections April 2009: It’s All About EU Membership
5.5 A New Government with a New Vision on EU Integration
5.6 The New Government: Fighting Recession and Restoring Public Confidence
5.7 Interest Groups’ Opinions on EU Membership
5.7.1 The Influence of the Icelandic Fishing Industry on Iceland’s EU Policy
5.7.2 The Left Wing Government’s Stand on Fisheries
5.7.3 CFP Reform: Not Such a Menace after All?
5.8 The Icelandic Public Opinion on EU Membership

6. The EU’s Opinion on Iceland’s Membership Bid
6.1 Adopting EU Rules and Regulations: Sensitive Issues in the Negotiating Process
6.2 The Icesave Issue and its Impact on Iceland’s EU Accession Bid

7. Concluding Remarks
7.1 Summary
7.2 Future Prospects

8. Bibliography

1. Introduction

“We are Europeans. We share your views, your culture. We have in fact contributed quite a significant part to the classical heritage of Europe. We belong in Europe.”

Össur Skarphéðinsson, Brussels, 27 July 2010

With these words, Össur Skarphéðinsson, Iceland’s Minister for Foreign Affairs welcomed the official opening of Iceland’s membership negotiations with the European Union and at the same time he subscribed to something that for many years had been unthinkable for the political elites in Iceland.

Until 2009, Iceland remained the only Nordic country that had never officially applied for EU membership. After being under foreign rule for several centuries, Iceland only became independent on 17 June 1944 (Hjálmarsson 2009: 178). Based on the historical development of Iceland, the ideas of independence and state sovereignty, both deeply rooted in the nation’s search for identity, had substantial impact on the country’s foreign policy. Even though surveys had already indicated during the 1990s that considerable parts of the population in Iceland were in support of EU membership talks, the political elites remained very skeptical toward the issue of European integration. This resistance was to a great part built on fears of losing state sovereignty to European institutions (Thorhallsson 2002: 349). Nevertheless, due to Iceland’s heavy reliance on international trade, the nation has over the past decades forged closer links with the European Union and joined several agreements, such as EFTA, EEA and Schengen. In this context, Iceland even adopted around 80 percent of EU laws and regulations through the EEA (Lægreid, Steinthorsson and Thorhallsson 2002: 349) - however, full EU membership still seemed out of the question. Yet, on 16 July 2009, only a few weeks after a new government had been formed, Iceland submitted its application for EU membership.

The overall aim of this work is to analyze and explain the change of behavior of the Icelandic political elites toward European integration, with specific focus on the domestic and external, political and economic developments that contributed to this change and eventually led to Iceland’s EU accession bid in 2009. To this end, the author has chosen to specifically focus on the time period from the outbreak of the financial crisis in Iceland in 2008 to the day of Iceland’s official EU application in July 2009. Nevertheless, historical developments that are relevant for properly explaining Iceland’s behavior toward European integration have been included where appropriate.

A number of actors, such as the political elites, economic interest groups and the civil society, interact and contribute to the decision making process in national and international contexts (Benz 2010: 118-119, Goodeve 2005: 86) and consequently to the decision whether a nation seeks EU membership or not. In this context, political elites act on the highest political level and possess much power in the decision making process, within the scope of rules of the respective governmental system (Benz 2010: 118-119). Furthermore, political elites can promote or condemn EU membership and thereby exert much influence on the public and on the overall response of a nation to European integration (Risse 2009: 157). For this reason, the author has chosen focus especially on the political elites in Iceland. Against this background and with regard to the terminology, expressions such as government, members of Althingi (the Icelandic parliament), and the terms used for the relevant government representatives, e.g. Prime Minister, Minister for Foreign Affairs etc. may all be subsumed under the overall term political elites. However, the opinion of the Icelandic public and economic interest groups toward the question of EU membership is included in this work as well. In addition, the opinion of the EU institutions on Iceland’s EU accession bid has been reviewed and will be explained.

As regards the literature review, several works on the Nordic states and European integration are available, mainly in English. However, it is only a small amount of literature that tries to explain the complex approach of small states to European Integration, and even fewer publications have tried to give a comprehensive and contemporary insight into Iceland and its relationship to European integration. This work was especially stimulated by Lee Miles and his book Sweden and European integration (1997), in which Miles evaluated the reasons behind Sweden’s EU accession bid in 1995. Moreover, Baldur Thorhallsson’s work Iceland and European integration: on the edge (2004) provided much insight into Iceland’s reluctant behavior toward EU integration before 2009 and thus contributed significantly to the reflection of the most recent developments and pointing out the specific changes. Motivated by Iceland’s EU accession bid in 2009 and because of her personal background as a former scholar of Scandinavian Studies, the author of this work aims to contribute to the general academic field of European integration and to the existing research on small states and European integration in particular, here exemplified by the specific case study on Iceland.

This thesis focuses primarily on exploring and analyzing the internal and external reasons that have led Iceland’s political elites to submit their EU accession bid in 2009 - or in other words, the main research question the author intends to answer is: What has caused

Iceland ’ s political elites to officially apply for membership in the European Union in 2009? In this context some sub-questions are raised and shall be answered in the course of this work: Why did Iceland ’ s political elites did not seek full EU membership before 2009? How did political elites, economic interest groups and Icelandic citizens perceive the idea of EU membership during the period from 2008 to 2009? To what extent has the change of government in 2009 contributed to the new EU integration policy of the Icelandic nation- state? In order to answer these questions and to explain the new direction in Iceland’s European integration policy, a number of hypotheses are put forward. These hypotheses are subject to examination and shall be either corroborated or rejected during the course of this work.

In 2008, Iceland was severely hit by the global financial crisis. Against the background of this crisis, major policy mistakes by political elites, bankers and other authorities were revealed and e]ventually led to the collapse of both the economic and political order in Iceland (OECD 2009a: 9). As a result, new elections were held, leading to the foundation of a left-wing government coalition with new visions on European integration. While it is often reported in the media that Iceland applied for EU membership solely because of its economic difficulties, the author of this work will prove that external and internal incidents, paired with alterations to one of the major obstacles within Iceland’s European integration policy have all together contributed to Iceland’s final decision to apply for EU membership. In this context, the first hypothesis is based on Lee Miles (1997), who argues that “domestic and external pressures” can influence a country’s EU accession bid as well as on the assumption made by Martin Marcussen et al (2001: 103), who state that nation-state identities are most likely to be challenged and even changed under “perceived crisis situations”. The first hypothesis states as follows: Domestic policy failures and external events alike have forced the Icelandic political elites to reconsider the social order of the Icelandic nation-state, search for alternatives and finally promote and embrace the idea of membership in the European Union.

Alongside domestic shortcomings and problems triggered by the financial crisis, it can be argued that a third factor contributed to the decision of the Icelandic political elites to apply for EU membership. The priorities of the fisheries sector were said to have exerted much influence on Iceland’s reluctant policy on European integration (Thorhallsson 2004: 11). However, already before Iceland submitted its EU accession bid, the European Commission had admitted that its management policies in fisheries had failed and started a large review process to improve its policies in this regard (EC 2009: 4-5). Hereunto Iceland was invited by the European Commission to contribute with its professional expertise.

Hence, the second hypothesis derives from the EU’s plans to review and improve its Common Fisheries Policies management (Government of Iceland 2010) and states: The review of the EU ’ s Common Fisheries Policy has revealed new options with regard to the management of fisheries in the European Union and altered the perspective of Iceland ’ s political elites toward the prospect of EU membership.

Since 2008, calls for a change emerged at all levels of society. In this regard, it is important to include the opinion of the Icelandic electorate (Goodeve 2005: 86), as it is the public, who is supposed to legitimize the decisions of the political elites. The third thesis is based on an argument of Iceland’s chief negotiator with the EU, Stefán Haukur Jóhannesson (2009: 12), who pointed out that the economic crisis has acted as “catalyst” for Icelanders to take a stance on the question of EU membership. Therefore, the third hypothesis claims: As a result to the economic crisis the benefits of EU membership were openly discussed and support for starting EU membership talks increased significantly among the Icelandic population.

This work is divided into seven chapters.¹ In chapter two, a comprehensive elaboration on the theoretical framework and the methodological approach of this work is provided, including an overall explanation of the relevance of European integration and why states seek to integrate with the European Union. In this context, the broad field of European integration theories is examined. However, the author has chosen to specifically focus on the theoretical approach of social constructivism, its prominent features and how it explains the process of European integration. Particular focus is put on the case study of Iceland. Therefore, the construction of the Icelandic nation-state identity and its impact on Iceland’s European integration policy shall be examined more closely. In addition to defining the Icelandic nation-state, chapter two positions the country within the Nordic community and explains the special characteristics and consequences of Iceland being a small state, together with the effect on European integration. Furthermore, it is explained how EU integration is accompanied by the diffusion of EU norms, ideas and regulations. Finally, the qualitative research methods that were used to conduct this work are outlined in detail.

In chapter three, the Icelandic nation-state is introduced. Based on geographic, demographic, political and economic variables, the distinguishing features of Iceland are presented. Here, Iceland’s historical development in particular is essential in order to understand why in the past Iceland’s governments behaved so reluctantly to European integration and why Iceland’s EU accession bid in 2009 can be said to be “a historic day, not only for Iceland but as well for the European Union” (Skarphéðinsson 2010).

Chapter four elaborates on the historical developments of the Icelandic European integration process and gives an overview of Iceland’s membership in European associations - EFTA, EEA and Schengen. Moreover, chapter four provides significant information on how the idea of EU membership was perceived at the domestic level in the past and gives an overview on the hesitant position of the Icelandic political elites on European integration from the 1970s to the late 1990s. In this context it is explained why, although Iceland strove for closer cooperation with the European Union in economic terms, full membership yet remained out of the question.

In chapter five, the central part of this work, the author analyzes the domestic developments and external events that eventually caused the political elites in Iceland to reconsider the social and political order and search for new alternatives. The period from 2008 to 2009 brought about significant change to the economic and political environment in Iceland. Therefore, the interrelationship between the economic recession, the domestic developments that lead to a review of the social order in Iceland and the nation’s EU accession bid will be analyzed in more detail. In addition, the background to the parliamentary elections in 2009 and the change of government, resulting in the appointment of a Social-Democratic Prime Minister for the first time in Iceland’s history, as well as its influence on Iceland’s EU application are researched. Furthermore, the opinions of significant Icelandic interest groups, in particular the powerful fisheries industry are researched. Finally, the general public’s opinion on Iceland’s EU membership bid is examined.

The sixth chapter provides an insight into how Iceland’s EU accession bid was perceived by the institutions and 27 member states of the European Union and which considerations and actions were taken on the European level. For this purpose, the author focuses here on the time period from the submission of Iceland’s EU application in July 2009 to the official opening of the membership negotiations in July 2010. In this context, the author will explain sensitive negotiation chapters and the problematic Icesave dispute. The overall findings of this research are summed up in chapter seven. In addition, an outlook on the future prospects will be provided.

2. Theoretical Framework and Methodological Approach

This chapter aims at explaining the meaning and causes of European integration. To this end, the author will offer an introduction in the broad field of European integration theories. In particular, social constructivism will be introduced as a theoretical approach to the study of European integration and explained in more detail, as it has been chosen by the author as appropriate to support this work’s analysis of why Iceland now wants to become a member of the European Union.

2.1 Development of European Integration: Why States Seek EU Membership

The European Union constitutes an extraordinary example of advanced regional integration and institutional complexity. Regional integration can be defined as: “über nationale Grenzen hinwegreichende Zusammenarbeit verschiedener Staaten zur Wirtschafts- und Wohlstandsförderung sowie zur Bewältigung von regionalen Strukturproblemen” (Lemke 2008: 157); if this regional cooperation is institutionalized, norms and rules develop and organizations for the purpose of further collaboration are established.

Despite discussions about the EU’s absorption capacity or the so-called democratic deficit² , today many states still seek membership in the European Union. At the time of writing, 27 states with almost 500 million inhabitants are members of the European Union - with the prospect of more to join.³ But what are the driving forces behind European integration? Why do states seek EU membership?

The idea of a European community already emerged during the course of the Second World War, mainly built on the idea of European federalists. They believed that a supranational federation could prevent the striving for power of the nation-states, which had plagued the European continent for the past centuries and regularly led to war and destruction. At the same time, common goals of peace and prosperity should be approached cross-border. However, in the early post-war era the focus was first and foremost put on economic reconstruction. Accordingly, the foundation of the European Coal and Steel Community in 1951 and the following birth of the European Economic Community, established by the Treaties of Rome in 1957, primarily contributed to the realization of a well-functioning supranational economic cooperation. Thus, it can be argued that at the beginning of the history of the European Union, European integration de facto resulted from the economic interests of the different nation-states (Lemke 2008: 158).

During the 1970s - a period also known as the “doldrum years” - political integration appeared to stagnate, signified by a lack of institutional developments (Diez and Wiener 2009: 6). Yet, in the mid-1980s, a new integration surge emerged against the background of changing conditions in the global market. The members of the European community went for further liberalization of the single market and intended to introduce a common currency, the Euro. When the Single European Act was passed in 1986, these propositions were ascertained and marked an essential step in strengthening the position of Western Europe in the global market, particularly against its competitors Asia and the USA (Lemke 2008: 158-159).

When the Treaty of Maastricht was signed in 1992, a milestone in the history of the EU was reached. The treaty put additional importance on the political meaning of the European Union, which had extended its scope from economic cooperation to becoming a political and economic community. In this regard, the creation of the so-called pillar structure of the European Union was a further important step in the development of the European Union, dividing the concept of the Union into three pillars: the European Community, the Common Foreign and Security Policy and Police and Judicial Cooperation. As a result the overall dynamic of the decision making processes within the EU have undergone serious changes. The treaty of Amsterdam, signed in 1997, strengthened the overall structural framework of the European Union and moreover introduced several institutional reforms. Subsequently, the institutional structure of the EU was again subject to reform measures, when the Treaty of Nice was signed in 2001 in order to make sure the EU would be able to cope with its eastward expansion (Lemke 2008: 159).⁴

In retrospect, the European Union has come a long way since its foundation in the mid- 20th century.⁵ Today, after the Treaty of Lisbon, which aimed at optimizing the working methods of the European Union, entered into force in 2009, the EU is not only expected to boost economic cooperation and prosperity but also to prevent crises and conflicts of all kinds and address global problems, e.g. climate change. Therefore it can be concluded that EU membership is no longer just about economic gains. Altogether, the idea of supranational interdependence has brought about over 50 years of peace, economic prosperity and social security (Pfetsch 2007: 51).

2.2 Why States Give up Sovereignty: the Broad Field of European Integration Theory

As explained above, political integration in the European Union has increased more and more over the past decades. In this context, member states had to transfer competencies and part of their state sovereignty⁶ from the national to the supranational EU level⁷. But why exactly were and are states willing to give up their sometimes hard-earned sovereignty? Several scholars have been trying to solve this question and have extensively researched European integration and developed integration theories. In the following, the author attempts to provide an insight into the broad field of European integration theories. Subsequently, the main focus of this chapter will be on social constructivism, as the theoretical framework chosen by the author for explaining Iceland’s wish to become a full member of the EU.

One of the more comprehensive and thorough analyses is European Integration Theory edited by Antje Wiener and Thomas Diez (2009).⁸ Their publication gives a detailed overview on the relevance and the development of European integration and further provides thorough insight into the multitude of theoretical approaches that have been put forward since the early 1960s. Diez and Wiener (2009: 4) define European integration theory as:

[T]he field of systematic reflection on the process of the intensifying political cooperation in Europe and the development of common political institutions, as well as on its outcome. It also includes the theorization of changing constructions of identities and interests of social actors in the context of this process.

The theoretical approaches on European integration can be grouped into two broad “schools of thought”: supranationalism and intergovernmentalism (Richardson 2006: 76). While the former argues that once European institutions have been set up, further integration will follow more or less automatically, the latter believes that nation-states have to be regarded as central actors of European integration and that institution-building is mainly based on bargains between nation-states with specific preferences, which believe that intergovernmental cooperation could benefit their own interests (Diez and Wiener 2009: 8- 9, Lemke 2008: 180)

Both federalists and functionalists support the general idea of a supranational Europe. Federalists, like Jean Monnet or Altiero Spinelli, considered European integration primarily as a political project that could best be realized through the commitment of political elites to collective values and goals. Furthermore, state sovereignty was considered as a catalyst for conflicts and wars between nation-states. Therefore, the idea emerged that a supranational political organization, such as a European federation, could help to overcome these problems (“function follows form ”) (Lemke 2008: 181). In this context, functionalists, too, support the paradigm of supranational integration; however, they believe regional integration to be based on economic grounds (Diez and Wiener 2009: 8, Lemke 2008: 180-181).

From the 1960s onwards, neo-functionalism, with prominent scholars such as Ernst Haas, Leon Lindberg, Joseph Nye and Philippe Schmitter, can be considered the dominant integration theory (Richardson 2006: 76). Especially Ernst Haas, a German emigrant in the United States, who developed the concept of neo-functionalism, has to be mentioned in this context. According to his work The Uniting of Europe (1958), specific attention should be paid to the importance of supranational institutions, driving further the development of European integration. Thus, Haas assumed (1958: 291-293) that with the foundation of the EEC in 1957, a substantial step away from the anarchic state system and toward supranational cooperation would be achieved, which could moreover lead to further integration or a “spill-over” into other areas. Eventually, according to Haas, the functional interconnectedness of various policy areas of industrial societies with similar interests would lead to the foundation of a supranational organization (“form follows function ”) (Lemke 2008: 181, Diez and Wiener 2009: 8).

On the other hand, intergovernmentalists explained supranational institution- building as “the result of bargains struck between nation-states with specific geopolitical interests that militated towards a ‘pooling’ of sovereignty⁹ in specific historical circumstances” (Diez and Wiener 2009: 9). Intergovernmentalism cannot be described as a theory in the conventional sense but rather a theoretical approach explaining intergovernmental cooperation. Since the late 1980s, liberal intergovernmentalism has belonged to the core theoretical approaches. Andrew Moravcsik, founder and most important representative of liberal intergovernmentalism, himself argues that “EU integration can best be understood as a series of rational choices made by national leaders” (Moravcsik 1998: 18). Consequently, the rational approach is useful to analyze economic motives behind European integration, however, the approach still neglects the “hidden” factors, e.g. national identity, and their influence on integration policy (Gstöhl 2002: 6).

Against the background of EU enlargement and constitutional revision, new theoretical approaches have entered the picture since the 1990s, facing the challenge of analyzing the process of an ever widening and deepening integration within the EU (Diez and Wiener 2009: 10). Moreover, it was taken into account that not only the interests of the nation-states define the process of European integration, but that also the European institutions themselves increasingly engage in the process as independent political actors. Accordingly, it was tried to interlink both supranational and intergovernmental approaches (Lemke 2008: 183). In this context, among others, the concept of multi-level governance,¹⁰ developed by Marks and Lisbeth Hooghe (2001), has tried to address the question of what sort of polity the EU in fact is.

Today, critical and constructivist approaches attempt to consider and include additional important and to some degree previously neglected elements into their research on European integration. Social constructivists, such as Thomas Risse, Frank Schimmelfennig or Ole Wæver regard the European Union as a social construction. According to them, this construction arises from complex processes and depends on historical developments. Furthermore, scholars of social constructivism have demonstrated the relevance of ideas, identities and collective norms within the process of European integration (Diez and Wiener 2009: 10; Lemke 2008: 184). For this particular work, the author has identified the constructions of ideas and identities as fundamental variables in Iceland’s process of European integration. Therefore, social constructivism has been chosen from the variety of integration theories as the preferable approach to explain why Iceland went for full EU membership in 2009. In the following part, the significant features of social constructivism will be identified, while subsequently, particular emphasis will be put on the identities of Iceland.

2.3 Social Constructivism and the Construction of Identities

The publication of the Journal of European Public Policy special issue in 1999 illustrates very well how, in the 1990s, social constructivism reached the study of European integration mainly as a spillover from the field of international relations (Christiansen et al. 1999).

Constructivists challenge the rationalist approach by arguing that interests are constructed in specific social environments and defined by historical developments as well as by cultural and social norms and values (Fierke and Wiener 2001: 123). In addition, it is believed that human agents contribute significantly to the construction of a social reality (Risse 2009: 145). Accordingly, in contrast to the rationalist approach, social constructivists look behind the surface of economic interest and preferences and analyze how national identities are defined, modified and how ideas are constructed (Ingebritsen 1998: 42). In this context, Thomas Risse (2009: 158) argues that:

[S]ocial constructivism does not represent a substantial theory of integration, but an ontological perspective or meta-theory. Constructivist insight might be used to generate theoretical propositions, e.g. on collective identity, constructions, their causes and their effects on the integration process.

In contrast to rationalists, who take actors’ preferences as given (Risse 2009: 147), social constructivists claim that “identities shape preferences” (Gstöhl 2002: 5). If this assumption is now applied to the case study of this work, it can be noted that in the past, Iceland, even though it has always been very dependent on other states in terms of international trade, in fact behaved very reluctantly toward the question of European integration. Accordingly, the author of this work believes that Iceland’s EU integration policy cannot exclusively be explained by economic factors but that other complex factors have also significantly contributed to the decision of the Icelandic political elites to apply for EU membership in 2009. Against this background, social constructivists claim that values, norms and ideas can influence and shape a nation’s political discourse and at the same time serve as legitimization for the actions of the political elites (Marcussen 2001: 102). Political discourse again is strongly influenced by existing collective identities¹¹, which identify and define groups as one entity, also known as imagined community (Marcussen et al. 2001: 102). The identification of these social groups can be based on a set of values, ideas and norms, to which the group relates positively. “[D]ie kollektive Identität regelt die Zugehörigkeit der Individuen zur der Gesellschaft (und den Ausschluß [sic] von ihr)” (Habermas 1982: 25). Thus, collective identities entail the essential distinction between inner and outer group, between inclusion and exclusion or between we and the others (Nissen 2004: 21, Wæver 2002: 20). Yet, individuals can, in fact, relate positively to more than one social group and feel a sense of belonging to various social groups (Szyszko 2005: 110). In this regard it should be noted that one can hold multiple identities.

In accordance with Ole Wæver, the concept of identity can be regarded as a relational concept, produced through “juxtapositions between selves and others”, as a result of which it is necessary to identify specific concepts which historically have come to take on particular importance as “vehicles of identity production” (Wæver 2002: 24). With view to European integration this means that depending on whether the image of Europe, constructed by the political elites, is positive or negative and resonates with the identity of the state in question, the integration process can be accelerated or slowed down (Ingebritsen 1998: 42-43.) Therefore, Gstöhl (2002: 214) argues that the individual and distinctive constructed national identity of the respective state in question must be taken into account when researching how and why a certain state reacts the way it does to European integration.

In the following, the collective identities or we-categories applicable to Iceland are explained in more detail. An explanation of these concepts is of essential importance to understanding the domestic debates on the sovereign nation-state, European integration and Icelandic European integration policy. After all, according to Wæver (2002: 20), an analysis of the relevant we-concepts of a nation can explain or even predict a country’s foreign and European integration policy respectively.

2.3.1 “We”: Iceland and Norden

In order to properly research Iceland’s European integration process, it is important to consider historical and socio-political variants of the country in question. Scholars who study the process of European integration of a specific Nordic country¹² cannot neglect the importance of Norden¹³. The Nordic countries are deeply connected by several variables, especially in consequence of their strong historical ties. Nils Andrén (1984: 252) points out that “Nordic countries together constitute a linguistic, cultural, economic, social, and political-ideological area, of considerable homogeneity”, a concept also referred to as Nordism. Besides similarities in terms of size, geographical location and political culture, the Nordic States have often been characterized by comparable features, such as a consensual democracy¹⁴, a generous welfare state, a stable economic system and their culture of compromise and equal opportunities (Hilson 2008: 23). These similarities are often subsumed under the term Nordic Model, a model often regarded as an example for many other states (Hilson 2008: 23).

Efforts between the Nordic states toward cooperation developed after the Second World War in particular. At this time, the Northern states promoted tight cooperation on the institutional level, with several ambitious plans like the Nordic Customs Union (1947), the Scandinavian Defence Alliance (1948-49) or the Nordic Economic Union of 1968 and 1969, that became to be known as Nordek (Hansen 2002: 13). However, none of these attempts for further Nordic integration was brought to a successful conclusion (Andrén 1984: 255, Hansen 2002: 13), only the Nordic Council, formed in 1952, of which Iceland is also a member, still exists today (Hjálmarsson 2009: 197). According to Andrén (1984: 252) those efforts toward cooperation could also be described as some sort of “Nordic nationalism”. Furthermore, already during the 1830s and 1840s, the environment created by poets and students in Copenhagen laid the foundation for the development of nationalism among all of those that were born and nurtured in the Danish empire, including the Icelandic nation- state. Accordingly, Iceland constructed itself as distinctive exemplar of a Nordic nation- state, while Norden as a whole maintained its transnational appeal (Hansen 2002: 12). Moreover, the existing bonds between the Nordic states, positioned Iceland within Norden.

According to Risse (2009: 153), an identity can be “nested” or “cross cutting” .¹⁵ In the case of Iceland, however, the tight bonds between Icelandic and Nordic identity make it difficult to neatly separate the given identity components on different levels, such as the concepts of “nestedness” and “cross-cutting” would imply. Icelandic and Nordic identities influence each other, mix and interconnect and therefore can best be conceptualized by the “marble cake model” according to which Nordic identity could be regarded as a constitutive part of Icelandic identity (Risse 2009: 153). All in all, the constructed community of Norden has influenced Iceland’s development in political, economic and social means.

When investigating the way in which the constructed identity of the Nordic community is employed in the debates on European integration, one could argue that the category of Norden might function as an intermediate category between the national and the European level (Hansen 2002: 11-12). Against this background, the special relationship between Iceland and the other Nordic states and their efforts to strengthen the Nordic community through a number of agreements and cooperation measures sets them apart from most other European countries, which are more directly confronted with the EU. On the other hand, Iceland has in the past also been very observant about how its Nordic neighbors behaved toward European integration.¹⁶

However, just as Iceland’s nation-state identity has been significantly influenced by its common area Norden and the concept of Nordism, national factors have also played an important role. They will be explained below.

2.3.2 “We”: the Icelandic Nation-State

In accordance to what was explained above, the Nordic and Icelandic identity mix and interconnect each other. But what features characterize the Icelandic nation-state and how do these characteristics affect the country’s European integration policy? In this context, Wæver argues that the constellation and interrelationship of nation and state has to be analyzed in order to better understand a country’s idea of Europe as well as its foreign policy. However, the concept of the nation-state does not underlie one systematic definition, but rather has to be defined for each country individually through concrete empirical textual work. In this regard, one may ask how the concept of the nation-state has been constructed and whether the country has spun its identity around a tight or rather loose coupling between the nation and the state (Wæver 2002: 35). In Iceland, national identity results from a very tight connection of the ideas of nation and state. Since the foundation of the Republic in 1944, the ideas of independence from foreign powers and state sovereignty have both created the basis of the Icelandic nation-state. Again and again, it was underlined by the political elites that for the first time it was the Icelandic people, who finally ruled their own nation. Iceland was regarded as an institution with roots deeply embedded in Icelandic history, culture and ideas; its national identity defined the future political agenda, on which sovereignty; nationalism and independence were to be put up on the highest rank. For many decades, these values represented the essence and legitimization of Iceland’s reluctant European integration policy (Hàlfdanarson 2004: 131-132). The idea of the sovereign nation-state has influenced the Icelandic debate on European integration very strongly and for many decades the Icelandic political elites have done little to promote the idea of full EU membership in their own country, while trying to preserve the nationalistic ideals of the past (Hàlfdanarson 2004: 138). However, in 2009, Iceland applied for EU membership. How the Icelandic EU application resonates/complies with the nationalistic ideas of independence will be analyzed in chapter five of this work.

As described above, many features can contribute to the construction of the nation- state - among others a nation’s history, its geographical location and size are all constituents of the nation-state and affect a nation’s identity. Against this background, the meaning of size, particularly for small states, has become an important and influencing variable in the study of European integration and will therefore be explained in the following.

2.4 Small States and European Integration

When writing about Iceland, the academic field of small state studies must not be neglected. There are a number of arguments and justifications for why it is important to engage in small state studies. This academic field brings small states into the centre of research and analyzes their specific impact on international relations or political economy. Nevertheless, it is not the purpose of this work to engage into the wider discussion about small states and European integration, rather a short insight into the topic shall be provided.¹⁷

According to Björn G. Ólafsson (1998: 3) there is no commonly accepted definition of a small state available, but he argues that “population is accepted as a measure of size and the sample of small states […] is limited almost entirely to countries with a population below one million”. I therefore propose to use this limit suggested by Ólafsson, according to which Iceland with its small size and population can be defined as a small state.

Peter Katzenstein has researched the impact and behavior of Small states in world markets and argues that small states, with their “open and vulnerable economies” (Katzenstein 1985: 34), pursue special strategies compared to larger states in how they respond to economic change. According to Katzenstein (1985: 23-24), the vulnerability of small states derives from the fact that they are too small to have a major influence on economic changes beyond their own borders. Due to their heavy dependency on free international trade, political and economic elites in small states do not have convincing alternatives than to allow a free market. In this context, policies of protection and structural transformation are avoided, which again leads to liberal and flexible adjustment strategies (Katzenstein 1985: 39). Altogether, small European states can adapt easily to incidents and change on the global market (Katzenstein 2003: 27). In addition, Katzenstein (2003: 11-12) emphasizes ideology as an explanatory construct and argues that the historical evolution of small European states can be regarded as reason for their specific political strategies. Baldur Thorhallsson (2006: 218) adds that the specific response of small states to European integration can be explained by their domestic characteristics and specific interests. In the context of the case study of this work, this means that due to Iceland’s heavy dependence on free trade, the nation has engaged in several trade agreements over the past decades, which will also be analyzed in the following.

As has been argued above, the size of a nation can affect the considerations of the political elites on EU integration. Political elites can either encourage EU opposition, because of a fear that membership in the EU, consisting of many different and partially larger states, could harm the small nation’s independence - or on the other hand support membership, looking for shelter from the small state’s vulnerability. In an interview with the author of this work, EU administrator Willem No (2010), underlined that he could understand the fears of a small island like Iceland, of being marginalized in such a big union consisting of many different states:

The image is drawn of this very large EU and very small Iceland, which in a sense is true, but on the other hand it shouldn’t be forgotten that the EU itself is mostly comprised of small countries, small member states, countries like Malta or, Cyprus or Luxembourg or the Baltic States, or Slovenia […]. Of course Iceland in population turns out to be the smallest, but still not that much smaller than countries like Luxembourg or Malta. So many of the perceptions and fears that [...] Iceland has, were shared, are shared by many of the existing member states and this also means that they have a lot in common, a lot of things to share on that [...] For the Icelanders as well it’s important to know this […] you are not about to be overwhelmed by the EU.

Accordingly, size can prove a very influencing factor in the political elites’ behavior toward EU membership. It can either promote or hinder the process of EU accession. Altogether, many different factors contribute to the considerations and decision making of the political elites when it comes to the question of EU membership. However, opinions on these issues are not irreversible. In fact, change in the political elites’ opinion on EU integration may occur. Under which conditions, such a change is possible or even likely, will be examined below.

2.5 The Political Elites and Continuity and Change in Nation-State Identity

Iceland’s Ambassador to Germany, Gunnar Snorri Gunnarsson (2010a) argued during his speech at a symposium on Iceland’s EU accession bid on 8 June 2010 that political elites possess much power when it comes to the question of EU membership. Depending on their rhetorical choices they have the power to either promote or condemn EU membership by for example rhetorically committing to the values and ideas of the EU (Risse 2009: 157). This means that by presenting how the idea of Europe could strengthen, or at least not threaten, the idea of the nation-state, political elites can for example argue in favor of EU membership (Hansen 2002: 2). Consequently, political elites can influence whether individuals feel more or less attached to the European Union and thus legitimize their actions as regards European integration policy (Nissen 2004: 22). In other words, political elites have the power to construct nation-state identity.

Yet, besides simply analyzing how political elites perceive European integration, it is also important to consider why exactly they pursue a certain European integration policy (Helbling, Hoeglinger and Wüst 2010: 496). According to Marcussen et al. (2001: 103) a specific position or nation-state identity constructed by political elites can be subject to change. However, change does not occur frequently, which, explained by social psychology theory, results from the fact that individuals are not capable of constantly adjusting their cognitive schemes to complex and changing signals from their social environment.

Marcussen et al. (2001: 102) point out three factors that help us to understand how political elites’ construction of nation-state identity relates to the idea of European integration and how a change in this constructed nation-state identity can occur:

First, new visions of political order need to resonate with pre-existing collective identities embedded in political institutions and cultures in order to constitute a legitimate political discourse. Second, political elites select in an instrumental fashion from the ideas available to them according to their perceived interests, particularly during ‘critical junctures’ when nationstate identities are contested and challenged in political discourses. Third, once nation-state identities have emerged as consensual among the political majority, they are likely to be internalized and institutionalized, as a result of which they become resistant to change.

As stated, new ideas have to “resonate” with pre-existing identities or concepts. Nation- state identities are only in so far exploited and constructed by political elites as they rationalize and legitimize the taken for granted preferences of actors, namely economic, political and security interests. Critical junctures, defined as “perceived crisis situations occurring from complete policy failures, but also triggered by external events” (Marcussen et al. 2001: 103-104) then force political elites to reconsider the existing nation-state identity that has been perceived as incapable or dysfunctional in dealing with certain issues in the existing political context. If political concepts are perceived as obsolete or even as having failed, the political elites will search for alternative options and start to promote new ideas regarding the political order and nation-state identity, hoping that these new ideas will meet present challenges.

With regard to the promotion of new ideas in the context of European integration, social constructivists emphasize that states interested in becoming a member of the European Union have to oblige the liberal principles of the EU, such as the social and political order, the rule of law or democratic participation (Risse 2009; 148). In addition, political elites can and should prove their willingness to comply with the obligation of the European Union by arguing openly in favor of the ideas and norms of the European Union. By engaging in rhetorical action, political actors “are obliged to justify their political goals on the grounds of the institutionalized identity, values, and norms” and by committing rhetorically to the ideology and long term goals of the EU, they add legitimacy to their political position (Schimmelfennig 2001: 63).

However, the important role of the electorate in this matter should not be neglected. Since the early 1990s, the importance of the civil society in the decision making processes at EU level has been increasingly discussed (Saurugger 2010: 471). Only when a wide audience can be convinced of new ideas can a change in nation-state identity be negotiated (Marcussen et al. 2001: 116). Accordingly, it could be said that through the interaction of several actors a certain nation-state identity or reality can be created or also changed. Once this nation-state identity has become consensual, it is likely to be internalized and institutionalized. In the context of European integration, several factors have to be taken into account in this process of institutionalization. To what extent the diffusion of EU norms has an impact on the creation of identities and the institutionalization process itself, will be clarified in the following.

2.6 EU Membership and the Diffusion of Norms

Within the process of European integration, the acceptance and incorporation of EU norms is of considerable importance. According to Risse (2009: 148), the EU as an emerging polity itself can influence how nation-states define their interests and even identities, with the ultimate goal that countries no longer see themselves only as European nation-states but EU states defined by their EU membership. “European integration itself can be described as an effort to promote the diffusion of ideas across Europe and beyond” (Börzel and Risse 2009: 3). In the context of researching and analyzing the conditions, mechanisms and the impact of the diffusion of ideas, Europeanization research has concentrated on examining how the diffusion process as such affects domestic politics, polities and policies in the present and future members states of the EU (Börzel and Risse 2009: 5). Today, central fields of domestic policy, e.g. economic, environment or labor policies, are influenced and regulated by developments and decisions made on the European level or in the European institutions respectively (Lemke 2008: 172).

Due to the diffusion of norms, a number of actors on the national and EU level have become involved in the decision making process, particularly regional and national parliaments as well as the EU institutions, all connected through some kind of interdependence (Peters and Pierre 2009: 94-95). In addition, interest groups and the civil society are also able to exert influence on the decision making process. As mentioned previously, this concept of multi-level-governance is typical of the European Union and has constantly strengthened the decision making process on the European level, instead of in the member states themselves.

[...]

¹ Chapters five and six were developed in accordance to Miles (1997: 179-209). Miles’ analysis on why Sweden sought EU membership in 1995 provided input and inspiration to this work. Nevertheless, the time period as well as the country and precise content researched in this work are different. The subchapter “External Strategic Environment-Changes to Neutrality” (Miles 1997: 1999-201) has inspired the author to transform and adapt this topic to the case of Iceland where the external changes to the Icelandic fishery policy and CFP reform and their impact on Iceland’s EU accession bid are researched.

² According to Hix (2008: 68), there is no single definition of the democratic deficit, instead a number of claims about the democratic deficit can be identified, among others, a lack of democratic participation, missing transparency in the decision making process or the question about the overall legitimacy of EU bodies. For further reading on the democratic deficit compare Hix (2008).

³ For detailed information on (potential) candidate countries see EC (2010d). 9

⁴ To read more on the EU’s treaties, pillar structure and its overall development compare Dinan (2010).

⁵ Arthur Benz (2003: 317) argues that the EU can neither be defined as supranational nor as a federal state, because of the fact that at EU level certain competencies of a sovereign government are still missing and decisions have to be made in accordance and cooperation with national institutions. He therefore uses the term “sui generis” to describe the system on which the European Union is based, referring to the hybrid character of the EU and the complex interdependence of the regional, national and EU levels.

⁶ Sovereignty is here understood as “national independence from outside interference” in both domestic and foreign affairs (Marcussen 2001: 106).

⁷ The shifting of competencies is an important aspect of European integration, and therefore explained in more detail in chapter 2.6.

⁸ For more information on European integration theory see Rosamond (2005), Jachtenfuchs and Kohler-Koch (2006) and Lemke (2008).

⁹ Compare Keohane and Hoffmann (1991).

¹⁰ The concept of multi-level governance is explained in more detail in chapter 2.6. 13

¹¹ The concept of collective identity results from a combination of social psychology, social identity and self- categorization theories. Collective ideas can be either expressed directly, in interaction or discourse, or indirectly, through the use of codes, signs and symbols (e.g. a national flag) (Marcussen et al. 2001: 102).

¹² By Nordic countries or Scandinavia, the author here primarily refers to the countries Iceland, Norway, Sweden, Denmark and Finland. However, the Faroe Islands and Greenland can also be considered part of the Nordic countries.

¹³ Norden is a Scandinavian term, usually used by the countries of the Nordic region for their common area or constructed community respectively (Ándren 1984: 253, Hansen 2002: 11).

¹⁴ In the course of this work, the feature of consensual democracy will be addressed in more detail in chapter 5.2.

¹⁵ For further explanations on the categories mentioned compare Risse (2009: 153).

¹⁶ This, for example, also affected Iceland’s decision to join the Schengen agreement in 1999. Iceland’s accession to Schengen as well as to other European agreements will be explained in more detail in chapter four.

¹⁷ To read more on the discussions about small state studies compare, among others, Neumann and Gstöhl (2004) and Ingebritsen, Neumann, Gstöhl and Beyer (2006).