by Dr George Zairis
On 29 August, Icelanders were called to the polls to answer a question that could shape the country’s relationship with Europe for years to come: whether Iceland should resume accession negotiations with the European Union. The result was a narrow but clear “No”, with 52.8% voting against and 47.2% in favour, alongside a remarkably high turnout of 82.6%!
Before looking at what lies behind Iceland’s “No”, it is worth putting the country into economic perspective. With a population of just around 400,000, Iceland is a small but highly developed and remarkably open economy, whose economic fortunes remain closely connected to the outside world. Following a contraction of 1.3% in 2024, real GDP returned to growth of 1.3% in 2025, while the IMF expects growth to accelerate to around 1.8% in 2026.
Trade remains central to this economic model. In 2025, Iceland exported ISK 923 billion worth of goods while importing approximately ISK 1.4 trillion, with aluminium and marine products dominating the export base. Marine products alone represented almost 39% of total goods exports. And despite remaining outside the European Union, Iceland is hardly economically detached from it: the EU is by far its largest trading partner, accounting for more than half of Iceland’s total trade in goods. Through its participation in the European Economic Area, Iceland already enjoys access to the EU Single Market, making its relationship with Europe considerably closer than its status as a non-EU country might initially suggest.
And this inevitably raises a broader and perhaps more uncomfortable question - Is the European Union no longer attractive enough? At first sight, the timing of Iceland’s “No” makes the result particularly striking. Europe is facing its most challenging geopolitical environment in decades: war has returned to the continent, transatlantic relations have become less predictable, trade tensions are intensifying and the Arctic is rapidly emerging as another arena of strategic competition. US President Donald Trump’s repeated ambition to take control of neighbouring Greenland has only reinforced the geopolitical importance of the region.
For the EU, bringing Iceland closer would therefore have represented considerably more than adding another small economy to the bloc. Iceland occupies a strategically important position in the North Atlantic and is a NATO member without a standing army, while its location close to Greenland and along the Greenland–Iceland–United Kingdom gap gives it particular relevance for Arctic and North Atlantic security. Yet geopolitics ultimately proved insufficient to convince Icelanders.
The explanation lies partly beneath the waters surrounding the island. Fishing is not simply another sector of the Icelandic economy: it is a major source of export revenues, employment and, perhaps most importantly, national sovereignty. Almost 40% of Iceland’s goods exports are marine products, and opponents feared that eventual EU membership would bring the country’s fisheries under the EU’s Common Fisheries Policy and weaken Reykjavík’s ability to independently determine how one of its most valuable natural resources is managed. For a country whose modern history includes the “Cod Wars” fought to secure control over its fishing waters, this is as much an issue of national identity as it is one of economics.
Ultimately, Iceland’s “No” should also serve as a message to Brussels. In an increasingly fragmented and uncertain world, the strategic case for a stronger and more united Europe may appear increasingly compelling. But geopolitical necessity alone will not make the European project more attractive. If the EU wants to bring countries such as Iceland closer, it must demonstrate that being part of the historical EU alliance can strengthen prosperity and security without unnecessarily eroding the national interests that citizens value most. And perhaps most importantly, Europe must convince not only governments and political leaders, but the people who ultimately decide at the ballot box. Because European integration cannot be built only in negotiating rooms in Brussels; it must also win the confidence of all European citizens!
*Dr George Zairis is an economist and a Director in Business Advisory at Grant Thornton Luxembourg, where he specialises in advisory services to EU and Public Sector. He regularly writes and publishes articles on European economic affairs, sustainable finance, ESG, financial markets and public policy. He holds a PhD from the University of the Peloponnese, an MSc in Banking Innovation and Risk Analytics from the University of Edinburgh, and a bachelor’s degree in Economics from the University of Athens.
By: N. Peter Kramer
