Crisis-battered Iceland seen halting EU talks

(REYKJAVIK) - The European Union's economic woes most likely helped Iceland's eurosceptic centre-right opposition oust the leftist government as voters in the crisis-battered nation failed to see the value in joining the bloc.

The Icelandic electorate on Saturday shunned the Social Democratic Alliance Party, which submitted an EU membership application in 2009 and campaigned on the issue, claiming it would tame the North Atlantic country's persistently high inflation.

The election's winning duo -- the conservative Independence Party and the centrist-agrarian Progressive Party -- have long wanted to end the bid.

But for most voters, it was unlikely to be a game-changer.

"It's something distant, nobody was interested," said Hannes Holmsteinn Gissurarsson, a political science professor at the University of Reykjavik known for his strong anti-EU views.

"There was a poll before the elections on the issues that mattered the most to voters. The EU came 10th or 12th, I can't remember," said his colleague Silja Bara Omarsdottir.

Although Icelanders are still feeling the aftershocks of the 2008 financial crisis in the form of sliding living standards and ballooning mortgages, the benefits that come from losing some of their sovereignty to Brussels are hard to see for many.

The country already has a free trade agreement with the EU, and is part of the European Free Trade Association (EFTA) and Europe's visa-free Schengen zone.

Moreover, the Icelandic economy has largely recovered from the banking system's spectacular collapse, while Europe has continued to grapple with its debt woes.

The Independence Party, with 19 seats in the 63-seat parliament after garnering 26.7 percent of the vote, has pledged to hold a referendum on whether to continue accession talks with Brussels.

Its likely partner, the Progressive Party (24.3 percent, also 19 seats), has simply said it's in the interest of the country to stay out of the union.

On Sunday, the two parties negotiated a government platform that, should a government be formed, was expected to include a planned referendum or an outright stop to the accession process.

However, the subject was not discussed on public broadcaster RUV during election night and doesn't spark a lot of debate, as polls for several months have predicted an overwhelming victory for the no-side.

Iceland said earlier this year it was putting the brakes on membership talks so the issue wouldn't interfere with the election.

Reykjavik has opened 27 chapters with the EU since negotiations began in July 2010, and has wrapped up 11 of them.

But the thorny chapters of agriculture and fishing, a major source of revenue for the island, have yet to start and are going to be the most difficult to negotiate.

Few Icelanders want to relinquish control of the sector by having to negotiate with countries like Britain and Spain, who would benefit from lower Icelandic quotas.

The country caught 1.15 million tonnes of fish in 2011, or more than one fifth the total catch of all the 27 EU member countries. At the same time, it is engaged in a "mackerel war" with Brussels, accusing the EU of overfishing the species.

"People are curious whether Iceland would be able to negotiate an exception in fisheries," said Stefania Oskarsdottir, a political scientist at the University of Iceland.

"EU advocates will tell you yes, EU opponents will tell you it's impossible. And we can't know before Iceland has signed an accession agreement," she added.

According to polls, a majority of Icelanders would like to see a referendum.