Iceland - Economic and Monetary Policy

Candidate countries conduct negotiations with the European Union (EU) in order to prepare themselves for accession. The accession negotiations cover the adoption and implementation of European legislation (acquis) and, more specifically, the priorities identified jointly by the Commission and the candidate countries in the analytical assessment (or ‘screening’) of the EU’s political and legislative acquis. Each year, the Commission reviews the progress made by candidates and evaluates the efforts required before their accession. This monitoring is the subject of annual reports presented to the Council and the European Parliament.

ACT

Commission Report [COM(2011) 666 final – SEC(2011) 1202 final – Not published in the Official Journal].

SUMMARY

The 2011 Report highlights that the country’s level of alignment with the European Union (EU) acquis remains incomplete on economic and monetary policy.

EUROPEAN UNION ACQUIS - (according to the Commission’s words)

EU legislation on economic and monetary policy contains specific rules requiring the independence of central banks in Member States, prohibiting direct financing of the public sector by the Central Bank and prohibiting privileged access of the public sector to financial institutions. Upon accession, new Member States will be expected to coordinate their economic policies and will be subject to the provisions of the Stability and Growth Pact on budget monitoring matters. These States are also committed to complying with the criteria laid down in the Treaty in order to be able to adopt the euro. Until their adoption of the euro, they will participate in Economic and Monetary Union as a Member State with derogation and will treat their exchange rates as a matter of common concern.

EVALUATION (according to the Commission’s words)

Some progress has been achieved by Iceland in the field of economic policy; however additional effort is required to improve its coordination with the EU’s policies. No new development has been noted in the field of monetary policy, the field in which alignment must be completed, particularly concerning the independence of the Central Bank and the prohibition of monetary financing of the public sector.

The country achieved a good level of alignment concerning the financial and budgetary rules. The country continued to identify the fields which still need to be aligned. Preparations connected with administrative capacity and for setting up the own resources system must be completed. A coordination structure needs to be formally established.

See also