(Bloomberg) -- Brexit is causing ripples across the North Atlantic.
The looming departure from the European Union of its second-largest trading partner is prompting Iceland to take a close look at its decades-old relationship with the rest of the continent.
Iceland’s parliament, the Althingi, has backed opposition calls for a review of its membership of the European Economic Area, which grants the small Nordic nation access to the EU’s lucrative single market. The Foreign Ministry’s report is to look at the potential fallout on Icelandic trade posed by the U.K.’s decision to leave the bloc, as well as the scope for Iceland to have a greater say in EEA decisions.
“Britain is one of the pillars of the European Union and one of our most important trading partners,” said Olafur Isleifsson of the opposition People’s Party, which sponsored the review. “Brexit has a meaning for all of Europe, and also for us.”
According to a recent study by Nordic political scientists Baldur Thorhalsson and Anders Wivel, Brexit poses a particular challenge for small countries such as Denmark or Iceland, which have been relying on Britain to defend free trade and counter what they call France and Germany’s “cooperative hegemony over Europe.”
What’s more, Iceland has undergone a deep transformation since joining the EEA in the early 1990s, with its economy now benefiting from a tourism boom after it survived the collapse of its biggest banks, in 2008. Isleifsson said it was high time for a review, given that the last one took place in 2007.
“The idea is to have a profound and objective platform in Iceland for a discussion on Europe,” Isleifsson said in an interview in Reykjavik.
One of Iceland’s most immediate gripes with the EEA concerns the so-called third energy package, which aims to consolidate the common European market for electricity and gas. Local critics fret that the package will weaken Iceland’s control over its natural resources and cede more power to European regulators.
The Independence Party and the Progressive Party, both members of Iceland’s coalition government, have both expressed reservations about the package ahead of a vote in parliament due to take place before the summer recess, in early June. An Icelandic rejection would put its application across the EEA in serious jeopardy.
To be sure, Iceland isn’t about to leave the EEA.
Foreign Minister Gudlaugur Thor Thordarson says there’s a lot to gain from sticking to the current agreement.
According to Throstur Olafsson, an economist who advised the Foreign Ministry when Iceland negotiated it’s EEA membership, lawmakers who are critical of the EEA are simply using Brexit as a pretext, noting that any changes would have to be agreed by all of its member states.
“Being in the EEA is like sitting in business class in Europe’s market. Leaving would be a very bad idea,” he said.
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