> By May 1992, the EEC had been renamed the EEA (European Economic Area) and all 7 member states of EFTA signed “The EEA Agreement” alongside the 12 member states of the EC.
The EEC was not renamed the EEA. The Maastricht treaty (signed February 1992, effective November 1993) established the European Union (EU), and renamed the "European Economic Community" (EEC) to the "European Community" (EC). Alongside the EEC-now-EC, there was also the European Coal and Steel Community (ECSC, dissolved in 2002) and the European Atomic Energy Community (EAEC or Euratom, still exists), and the three linked Communities were known as the "European Communities", which was another expansion of "EC". And the EC formed one of the pillars of the European Union, until the Lisbon treaty (signed December 2007, effective December 2009) merged the European Community into the EU and it ceased to independently exist, although Euratom continues as essentially a subsidiary body of the EU. And then the EEA is a separate arrangement, established by a treaty between the EC, its member states, and the EFTA member states, signed May 1992, effective January 1994. So the EEC was not "renamed" to the EEA. The EEC/EC/EU and EEA are separate but overlapping arrangements – the EEA is geographically broader in scope, but topically narrower (certain EU laws and regulations are excluded from the EEA, and hence the EFTA states do not have to adopt them)
> So the EEC was not "renamed" to the EEA. The EEC/EC/EU and EEA are separate but overlapping arrangements – the EEA is geographically broader in scope, but topically narrower (certain EU laws and regulations are excluded from the EEA, and hence the EFTA states do not have to adopt them)
The EEA has much the same scope as the EEC. So in practice the EEC was renamed to the EEA (and the EC was instituted with a broader remit), even if the mechanics of how it was implemented are slightly different.
It was not renamed to the EEA, in practice or otherwise. The EEA is a geographic part of Europe based on an agreement between the EFTA, the EU, and the various member states. The EEC was a supranational organisation with a whole internal structure (council, parliament, etc). They are not even the same kind of entity.
You can argue about the roles of these different bodies and how some of them were superseded by some others. Although non-EU, EEA member states are outside both the CPA and the CFP, which were cornerstones of the EEC. The EEA is not some mythical, ideologically pure version of the EU as it was back when it was only a common market (it never was). It’s a completely different thing. It was initially a way of functioning for countries that wanted to be close to the EC, but not too close. Saying that the EEA is the EEC renamed is plainly, factually wrong.
The EEC was renamed the EC and disappeared in 2009, at which point the EEA had been existing for 15 years.
The EEA had several significant exclusions compared to the EEC/EC at the time of its founding: agriculture and fisheries (although it has some application to trade in those products), customs, external trade, taxation, monetary policy. Furthermore, under the Amsterdam treaty (effective 1999) the EC gained responsibilities for immigration, visas, asylum, and judicial cooperation in civil law (which were transferred from the non-EC part of the EU), and the EEA was not extended to cover those new areas (although some of them apply to the EEA member states through their independent membership of Schengen). The EEA is also excluded from the scope of the EU trade mark (f.k.a. community trade mark) and EU unitary patents. The EEA agreement promises future negotiations on extending EU patents to the EEA, but thus far nothing much has happened there, in part because actually getting a common EU patent system up and running turned out to be very difficult and despite being first proposed in the 1970s it took until 2023 to actually become a reality (the biggest obstacle, but not the only one, has been Spain's objection to Spanish not being one of the official languages of the EU patent system–the ultimate solution was to effectively give Spain an opt-out from it)
There's also the Council of Europe, which has an almost identical flag as the EU but is completely unrelated to it. Not to be confused with the European Council, one of the ruling bodies of the EU.
With the Arctic turning into the next shipping route, Iceland could turn to be the Singapore of the North Atlantic, a trading hub. I mentioned this to an Icelander a few months ago, and he said China recently asked if they could build a port in the north of the country...
I think you underestimate Singapore. They put a lot of effort into not being just a trading hub.
Also, what's the point in loading and unloading in Iceland, when you're already fairly close to ports like Rotterdam, Antwerp and Hamburg? I get that you could in theory ship around the pole, split your containers in Iceland and ship to the US and EU from there. It's just that unloading a container ship isn't that fast, and we're already shipping so much that the load could just be distributed across multiple ships with separate destinations.
Iceland effectively has free electricity. I believe they are one of the biggest producers of refined aluminum. Could use it as a way station to process raw material that require a lot of electricity.
Singapore is also an island, but its relevance to global trade has more to do with the strait it sits in than in being an island. Obviously there are more factors, compare Singapore to Peneng, for example.
Dude, ignore these people.
HN has the weirdest bunch of computer nerds that hasn't taken a history class in their lives.
For everyone else, Singapore is important because it sits right at the end of the historical trade route of the Straits of Malacca. There is a whole wikipedia entry about it.
Singapore controls the east shipping route. There is a very narrow route there, easily controllable by military, if necessary.
Iceland not all. You can easily get around them. The Azores were the trading and fruit manifactoring hub there instead. They could deliver all the fruits for all of Europe. What can Iceland deliver to Europe? They are also in the center, not the north route.
Seems unlikely. Freight would be heading primarily from Asia to either Europe or US East coast, and maybe a bit in the opposite direction.
In either case, Europe and the US have such efficient rail/road freight that I can't see economics of putting a hub in Iceland making sense. You may as well have ships travel direct to the respective continental mainlands.
(Not a shipping cargo person, so take what I say with a grain of salt)
The value is cross-loading delivers greater network effects. You have many possible paths to get to your destination, and can pick the most optimal for your particular needs at each step.
Most container ships are on a sailing schedule - they visit a set number of ports, and generally stick to it (absent other issues).
So you can get out of your origin country quicker by just picking the next ship with the cheapest rates going to approximately the right location.
For the shipping lines it's more efficient to just pick up a lot of containers at once and visit multiple ports than try and get a full load to just one destination.
It also means that each port they visit they're also getting paid for new cargo for onward destinations, not running empty (or waiting for another full load) to do another trip.
This is nothing new. 5-7 years ago there were "plans" announced involving a German conglomerate wanting to create a giant container port in the east of the island.
I always wonder how realistic is this? I assume we dont need special vessel for this shipping lane and we can somehow always clear all the ice before us.
> I assume we dont need special vessel for this shipping lane and we can somehow always clear all the ice before us.
With climate change there are longer and longer times of the year when there is no ice. And when it does reform it is often not as thick as before, so less robust ships may be needed.
That's exactly why Trump wants to annex Greenland. I'm not taking sides here, but I see why world powers want to control that region, knowing that Russia probably will make incursions in that region—they already control the Arctic to some extent as if it's part of their territory...
There aren't "sides" to one country invading another country any more than there are "sides" to you forcing your neighbors at gun point to get on a bus to live in another city so you can sell their house.
There's no "why" to what Trump has been saying about Greenland, Panama and Canada. At least not in terms of anything that he seriously believes the US needs to actually do.
It's just another part of his shlock-and-awe campaign, like all these appointments of obviously unqualifed people to important positions. He does stuff like this to get people riled up, and ready to believe he's capable of anything. And always talking about him, non-stop.
People in favor of Iceland joining the EU should be honest and transparent that it's a pro inflation policy. In fact, Icelandic inflation would probably skyrocket.
The higher Icelandic rate is set for Icelanders by Icelanders in order to bring their 4.8% inflation rate down to the 2.5% target.
If Iceland adopted the EU's interest rate which is mainly set for France and Germany, that would be a 5% interest rate cut which is a massive stimulus. Icelandic inflation would skyrocket and there would be no chance of hitting the 2.5% target.
The US Dollar works because of massive fiscal transfers from states on the coasts to states in the interior. The US also allows whole areas to deindustrialize like Detroit in order to solve the unavailability of currency adjustments between states.
Are Icelanders willing to subsidize Greece? Are they willing to forgo their ability to devalue their currency like in 2008? Without devaluation that means deindustrialization.
For all the above reasons, Iceland joining the EU would be the stupidest and most economically illiterate decision in it's history.
There isn't a simple functional causal relationship between interest rates, inflation and currency rates.
And in fact, I think you have it exactly backwards in this case.
Many countries have dollarized their economies - replacing a local currency supported by high interest rates with the US dollar which has even lower interest rate than EUR - as a tool to tame inflation or kill hyper-inflation. Other - small non-EU countries have adopted the Euro for the same reason.
And with the same result - a massive fall in inflation.
This isn't just theory, this has been observed to work over and over again.
Sorry but you have it backwards. The examples you have in mind are South American and Eastern European countries 20 years ago ie emerging markets struggling to maintain a currency peg.
Iceland doesn't suffer from hyperinflation and it's already got an established central bank and trusted institutions. Lowering the interest rate in this environment would 100% lead to more inflation.
Plus Iceland relies on currency devaluation to cope with shocks. It would be crazy to give this up.
> People in favor of Iceland joining the EU should be honest and transparent that it's a pro inflation policy. In fact, Icelandic inflation would probably skyrocket.
It would not, simply because joining the Euro Area isn't a one time thing, but a series of steps, and they wouldn't move forward as long as the inflation is higher than in the rest of the EU.
> If Iceland adopted the EU's interest rate which is mainly set for France and Germany, that would be a 5% interest rate cut which is a massive stimulus.
Interests rate is only one of the factors involved in controlling inflation, and the fact that Italy has been able to adjust its economic policy in order to align its inflation figures to Maastricht requirements and join the Euro Area is a good proof of that.
> People should also look into Optimal Currency Area theory popularized by Paul Krugman
It has been popularized by Robert Mundell in the 60s, for which he got the Sveriges Riksank prize (the "Nobel") in 1999, not by Paul Krugman.
> For all the above reasons, Iceland joining the EU would be the stupidest and most economically illiterate decision in it's history.
The creation of the Euro is IMHO the "most economically illiterate decision in […] history" but moat of your arguments above miss the mark.
Inflation will always be higher in Iceland, because they have a very specific pro union setup which guarantees salary increases each year. As a result of the unions, Icelanders work very few hours and earn some of the highest wages in the world - https://en.wikipedia.org/wiki/Icelandic_Confederation_of_Lab... It won't (I hope) be following Italy as an economic model.
By "popularized" I mean brought to a modern audience in Krugman's New York Times column. It's Mundell's theory of course.
Interest rates are the main way to fight inflation. Glad we agree that the Euro is a silly currency union!
In theory EU and the Euro area are the same, because the TFEU says so. But in practice it's more complicated than this as Danes negotiated and opt-out clause during the negotiation of the treaty of Maastricht, and even though such clause isn't open to new entrants, in reality nothing prevents negotiations to eventually lead to such an outcome.
The case of Sweden is interesting though, they don't have an opt-out clause so they are obligated to adopt the Euro eventually, but they exploited a loophole by not joining the newest version of European Exchange Rate Mechanism after the 1999, which prevents their entry in the Euro.
Of course, the EU often ignores its own treaties. So that's not a hard guarantee. But the first rule of the EU is that everyone has to pretend it follows its own rules even when it doesn't, so it's not like Icelandic leaders can just announce they'll join the EU but won't adopt the Euro.
Because the Icelandic krona is basically universally agreed by everyone to be garbage monopoly money that only stays because of the oligarchs that are in power.
Also, yeah, the Danish Krona is pegged to the euro at ~7.45 so there is little incentive to switch over.
> massive fiscal transfers from states on the coasts to states in the interior
That's because of how US politics work. Less populous states have disproportionately higher political power. It's not a monetary policy thing. It's a core difference between US and European politics.
> The US also allows whole areas to deindustrialize
That's because Americans are free to live and work where they choose.
There's a lot more nuance here, if you look at Obama's memoir, he writes quite frankly about the dilemma of propping up the US auto industry with government dollars. When they (US automakers) asked for bailouts, he found them quite mismanaged, but if they went under a large portion of the US economy would find itself unemployed.
EU needs to evolve to become closer to USA (imo). Not be a loose union with a central suggestion organ, but a real federation, with unified laws, army etc, provisions to punish sabotage and collaborators with enemies of such new federation and so on. Then internal monetary transfers would make sense, because Iceland and Greece would just be two internal regions.
PS: of course it's ok if that never happens. But then EU can't expect to compete, due to not having good properties of truly decentralized collection of countries and neither of a true federation. Any startup will/is be hobbled by the mandatory EU law framework and structure, but won't benefit from the single law set or single language because those don't exist in EU.
I wonder in the coming years if we'll see the US actually become more like the EU. I expect there to be significant competition between Texas and California, in terms of industry, polity and philosophy. As the US continues to be internally fragmented politically, we're bound to see states compete actively, sometimes even to the detriment of other states. While we won't see a significant fragmentation like the EU, we will see a country that's so internally divided, there would be saboteurs and collaborators with enemies. We're kind of already seeing this, for example Texas and Florida shipping their illegals into Massachusetts and NY, states being firmly in the control of one party, with no room for switching governments, and the ever present question of states' rights.
The US isn't the only possible model for states to cooperate as part of a larger entity. There are many examples of federations with little fiscal transfers - which are also highly successful - Switzerland is an extreme example.
Bit late to the party. Just today on a Germany political podcast (Phoenix Runde) I was hearing the "experts", the crop of people who are largely responsible for the current economical and political under performance of the union, ... musing on what the solution could be to make Europe great again.
Their solution? Create an inner union of the EU countries that really matter (Germany, France, Beneleux ...etc). No I'm not making this up. It's not even the first time this idea was floated around. So to me it seems that the EU as a single block is almost finished.
> So to me it seems that the EU as a single block is almost finished.
I don't know how old you are but as a European with a passing interest in politics I have been hearing this at least every month for the last ~20 years. And I'm sure it was said long before then.
What you need to understand is that the EU exists, and has pretty much always existed, in a constant state of crisis. There is always some major disagreement, some urgent problem. This is just a consequence of the EU's existence as an attempt to unify (in some respects) 27 pretty diverse member states. The EU has survived all of these crises to date. I'm not saying it will exist forever, but I see no reason to believe that the current set of crises will be the ones to kill it. The EU may change but I think it will trundle on for the foreseeable future.
Also, there is already an "inner union", it is called the eurozone. Again... constant state of crisis.
Euroskeptics used to say that the EU is Germany-first and France/Benelux second and everyone else last. The EU establishment used to deny this. To actually now go out and create an inner union is to validate exactly the euroskeptic claim.
The organisation founded in 1957 which is now known as the European Union, originally had six members: Belgium, France, Germany, Italy, Luxembourg and the Netherlands.
Yes, and Germany and France have also been open that the goal was always (and still is) political union. For a lot of other EU countries that is not the goal. So there has always been an "inner core". Making that official is not going to be a huge jump, or particularly destabilising.
The fact that you’re basing this off a podcast aside, it seems fine to allow deeper political ties for countries which want it. Some, but not all, want a unified pan-European military for example. Some countries would prefer the EU remain in its current quasi-(con)federation form, but there’s a group which would gladly form a stronger federation like the United States.
What's the use of a pan EU military when most EU members are already in NATO? Just to add Austria, Cyprus and Ireland to a pan EU force? Rather than that allow a share of EU funds to be used for members' militaries and adopt common EU military policies. Also incentivize EU members to buy EU military equipment using such EU funds.
It’s pretty obvious than enlargement went too fast and is an utter failure. It was mostly pushed by the UK which wanted to weaken the union as a political entity as much as possible.
It’s even more true with the euro zone where some members are directly harmed by the high exchange rate.
It would make a lot of sense to go back to a smaller more integrated union with the countries which want it and leave the ones which only want the single market be part of a less integrated union.
Then again, considering Germany and France disagree about pretty much everything at the moment, I doubt it would go very far.
> It would make a lot of sense to go back to a smaller more integrated union with the countries which want it and leave the ones which only want the single market be part of a less integrated union.
That option does exist, albeit in a bit of a roundabout way. Nothing is stopping a member country from leaving the EU and joining EFTA and the EEA afterwards. The fact that no country is seriously contemplating this is telling.
I visited Iceland in 2013 and between Keflavik and Reykjavik there was a single billboard with the EU emblem and the words “Nei Takk” (no thanks). This article puts a lot of that sentiment in perspective.
Our takeaway at the time was that this has to be the most effective billboard in the country as there is only one road between the major international airport and the capital.
I'm all for European unity, but if a country is only half-committed to joining the EU, it probably should not be allowed to join under the assumption that EU support will continue to grow.
You could say this for pretty much every important decision in every democracy ever. It's seldom things get settled with percentage support starting with anything other than a 5.
It's a form of institutional hysteresis. If a major change can get implemented by a simple majority, it has zero noise margin. If it requires (say) two thirds, then it has a noise margin of 33 percentage points.
I am still stunned that Brexit was left to a 50% + epsilon referendum.
The problem is that many decisions in the EU require exactly 100% support of member states, which is a problem if you have a country with wildly different ideas than others (now Hungary, a few years ago Poland).
60% is a very huge number, not understanding the "only" wording.
Also, as an European I know virtually no people opposing EU membership, when there are, it's generally less educated people thinking that the economy or whatever would be better.
I hope to see even more "stupid AI regulation" in the future, fingers crossed.
Recently I benefited from a "stupid regulation" mandating minimum Internet speeds carriers need to provide. How dare the policy makers interfere with the extortionate prices every single ISP in the market colluded to impose on the population. Muh liberty!
Plus the undemocratic law making process and the unelected EU commission that is an authoritarian institution without anyone keeping it in check. The DSA is a censorship law with an added backdoor (look up "emergency response" and its implications). And tethered caps are just annoying ;)
While in Iceland I learned from local fisherman who have conflicting thoughts on joining the EU. On one hand it could strengthen relations, but on the other they would not be able to preserve their fisheries from being over fished.
That is a myth propagated by the owners of the fishing companies.
The real reason they oppose the EU is that they benefit immensely from having income and debts in Euros and dollars, while their expenses and interest bearing assets are in the weak and high-interest ISK.
Consider that icelandic mortgage interest rates are currently 9-11% but a few years ago they were 4% which was celebrated as historically extremely low rates.
No, it’s a very real threat. Icelandic waters can only be fished by Icelandic vessels. That’s what the cod wars were about; protecting our right to be the only ones to fish our waters.
If we join the EU we’re pretty much guaranteed to lose this exclusive access to our waters, and that will be devastating for the economy, given how the fishing industry is one of very few industries keeping the economy afloat. Especially considering exports to other countries.
The EU has an abysmal history of setting and managing ITQs in its waters, with Iceland having some of the best (but not at all perfect) managed waters in the world.
So there is plenty to be skeptical about when it comes to how negotiations would go on the matter.
Um, joining the EU is not the same as joining the Euro. They can keep doing this exact thing after joining the EU if they keep their currency just like a few others are doing.
No, this is mostly about fishing rights afaik. Britain also kept having issues on that front.
You mean Sweden and Denmark, not Scandinavia. And both have different ideas about joining the Eurozone. Norway isn't part of the EU. Finland is using the Euro.
Absolutely Unrelated, what is living-systems.is ? Your name catch my attention then you're company name catch my curiosity. Your site has left me thirsty. If you're doing brand/marketing well done but I hope it's something else!
Readit News
> By May 1992, the EEC had been renamed the EEA (European Economic Area) and all 7 member states of EFTA signed “The EEA Agreement” alongside the 12 member states of the EC.
The EEC was not renamed the EEA. The Maastricht treaty (signed February 1992, effective November 1993) established the European Union (EU), and renamed the "European Economic Community" (EEC) to the "European Community" (EC). Alongside the EEC-now-EC, there was also the European Coal and Steel Community (ECSC, dissolved in 2002) and the European Atomic Energy Community (EAEC or Euratom, still exists), and the three linked Communities were known as the "European Communities", which was another expansion of "EC". And the EC formed one of the pillars of the European Union, until the Lisbon treaty (signed December 2007, effective December 2009) merged the European Community into the EU and it ceased to independently exist, although Euratom continues as essentially a subsidiary body of the EU. And then the EEA is a separate arrangement, established by a treaty between the EC, its member states, and the EFTA member states, signed May 1992, effective January 1994. So the EEC was not "renamed" to the EEA. The EEC/EC/EU and EEA are separate but overlapping arrangements – the EEA is geographically broader in scope, but topically narrower (certain EU laws and regulations are excluded from the EEA, and hence the EFTA states do not have to adopt them)
The EEA has much the same scope as the EEC. So in practice the EEC was renamed to the EEA (and the EC was instituted with a broader remit), even if the mechanics of how it was implemented are slightly different.
It was not renamed to the EEA, in practice or otherwise. The EEA is a geographic part of Europe based on an agreement between the EFTA, the EU, and the various member states. The EEC was a supranational organisation with a whole internal structure (council, parliament, etc). They are not even the same kind of entity.
You can argue about the roles of these different bodies and how some of them were superseded by some others. Although non-EU, EEA member states are outside both the CPA and the CFP, which were cornerstones of the EEC. The EEA is not some mythical, ideologically pure version of the EU as it was back when it was only a common market (it never was). It’s a completely different thing. It was initially a way of functioning for countries that wanted to be close to the EC, but not too close. Saying that the EEA is the EEC renamed is plainly, factually wrong.
The EEC was renamed the EC and disappeared in 2009, at which point the EEA had been existing for 15 years.
The EEA had several significant exclusions compared to the EEC/EC at the time of its founding: agriculture and fisheries (although it has some application to trade in those products), customs, external trade, taxation, monetary policy. Furthermore, under the Amsterdam treaty (effective 1999) the EC gained responsibilities for immigration, visas, asylum, and judicial cooperation in civil law (which were transferred from the non-EC part of the EU), and the EEA was not extended to cover those new areas (although some of them apply to the EEA member states through their independent membership of Schengen). The EEA is also excluded from the scope of the EU trade mark (f.k.a. community trade mark) and EU unitary patents. The EEA agreement promises future negotiations on extending EU patents to the EEA, but thus far nothing much has happened there, in part because actually getting a common EU patent system up and running turned out to be very difficult and despite being first proposed in the 1970s it took until 2023 to actually become a reality (the biggest obstacle, but not the only one, has been Spain's objection to Spanish not being one of the official languages of the EU patent system–the ultimate solution was to effectively give Spain an opt-out from it)
Also, what's the point in loading and unloading in Iceland, when you're already fairly close to ports like Rotterdam, Antwerp and Hamburg? I get that you could in theory ship around the pole, split your containers in Iceland and ship to the US and EU from there. It's just that unloading a container ship isn't that fast, and we're already shipping so much that the load could just be distributed across multiple ships with separate destinations.
But yet that's still where the lion's share of revenue for their Government comes from.
For everyone else, Singapore is important because it sits right at the end of the historical trade route of the Straits of Malacca. There is a whole wikipedia entry about it.
https://en.wikipedia.org/wiki/Strait_of_Malacca
Not a given, but an okay speculation fodder.
Iceland not all. You can easily get around them. The Azores were the trading and fruit manifactoring hub there instead. They could deliver all the fruits for all of Europe. What can Iceland deliver to Europe? They are also in the center, not the north route.
In either case, Europe and the US have such efficient rail/road freight that I can't see economics of putting a hub in Iceland making sense. You may as well have ships travel direct to the respective continental mainlands.
The value is cross-loading delivers greater network effects. You have many possible paths to get to your destination, and can pick the most optimal for your particular needs at each step.
Most container ships are on a sailing schedule - they visit a set number of ports, and generally stick to it (absent other issues).
So you can get out of your origin country quicker by just picking the next ship with the cheapest rates going to approximately the right location.
For the shipping lines it's more efficient to just pick up a lot of containers at once and visit multiple ports than try and get a full load to just one destination.
It also means that each port they visit they're also getting paid for new cargo for onward destinations, not running empty (or waiting for another full load) to do another trip.
Maersk list ship schedules here: https://www.maersk.com/schedules/portCalls and with a few clicks, it's obvious that most ships call at many ports.
Plus your crew may need some downtime sometimes.
I always wonder how realistic is this? I assume we dont need special vessel for this shipping lane and we can somehow always clear all the ice before us.
With climate change there are longer and longer times of the year when there is no ice. And when it does reform it is often not as thick as before, so less robust ships may be needed.
good one!
also, i was thinking about UK joining EFTA, though so far they didnt...
It belongs to the few thousands people that live there and want to be part of Denmark and Europe.
There's really no claim to Greenland other than "it's close".
It's just another part of his shlock-and-awe campaign, like all these appointments of obviously unqualifed people to important positions. He does stuff like this to get people riled up, and ready to believe he's capable of anything. And always talking about him, non-stop.
See also: https://en.wikipedia.org/wiki/Bread_and_circuses
Why?
Iceland's interest rate is 8.5% https://www.cb.is/other/key-interest-rate/
EU's interest rate is 3% https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
The higher Icelandic rate is set for Icelanders by Icelanders in order to bring their 4.8% inflation rate down to the 2.5% target.
If Iceland adopted the EU's interest rate which is mainly set for France and Germany, that would be a 5% interest rate cut which is a massive stimulus. Icelandic inflation would skyrocket and there would be no chance of hitting the 2.5% target.
People should also look into Optimal Currency Area theory popularized by Paul Krugman eg https://archive.nytimes.com/krugman.blogs.nytimes.com/2012/0...
The US Dollar works because of massive fiscal transfers from states on the coasts to states in the interior. The US also allows whole areas to deindustrialize like Detroit in order to solve the unavailability of currency adjustments between states.
Are Icelanders willing to subsidize Greece? Are they willing to forgo their ability to devalue their currency like in 2008? Without devaluation that means deindustrialization.
For all the above reasons, Iceland joining the EU would be the stupidest and most economically illiterate decision in it's history.
And in fact, I think you have it exactly backwards in this case.
Many countries have dollarized their economies - replacing a local currency supported by high interest rates with the US dollar which has even lower interest rate than EUR - as a tool to tame inflation or kill hyper-inflation. Other - small non-EU countries have adopted the Euro for the same reason.
And with the same result - a massive fall in inflation.
This isn't just theory, this has been observed to work over and over again.
Iceland doesn't suffer from hyperinflation and it's already got an established central bank and trusted institutions. Lowering the interest rate in this environment would 100% lead to more inflation.
Plus Iceland relies on currency devaluation to cope with shocks. It would be crazy to give this up.
It would not, simply because joining the Euro Area isn't a one time thing, but a series of steps, and they wouldn't move forward as long as the inflation is higher than in the rest of the EU.
> If Iceland adopted the EU's interest rate which is mainly set for France and Germany, that would be a 5% interest rate cut which is a massive stimulus.
Interests rate is only one of the factors involved in controlling inflation, and the fact that Italy has been able to adjust its economic policy in order to align its inflation figures to Maastricht requirements and join the Euro Area is a good proof of that.
> People should also look into Optimal Currency Area theory popularized by Paul Krugman
It has been popularized by Robert Mundell in the 60s, for which he got the Sveriges Riksank prize (the "Nobel") in 1999, not by Paul Krugman.
> For all the above reasons, Iceland joining the EU would be the stupidest and most economically illiterate decision in it's history.
The creation of the Euro is IMHO the "most economically illiterate decision in […] history" but moat of your arguments above miss the mark.
By "popularized" I mean brought to a modern audience in Krugman's New York Times column. It's Mundell's theory of course.
Interest rates are the main way to fight inflation. Glad we agree that the Euro is a silly currency union!
Edited to remove Sweden because it's obliged to eventually adopt the euro.
The case of Sweden is interesting though, they don't have an opt-out clause so they are obligated to adopt the Euro eventually, but they exploited a loophole by not joining the newest version of European Exchange Rate Mechanism after the 1999, which prevents their entry in the Euro.
Of course, the EU often ignores its own treaties. So that's not a hard guarantee. But the first rule of the EU is that everyone has to pretend it follows its own rules even when it doesn't, so it's not like Icelandic leaders can just announce they'll join the EU but won't adopt the Euro.
Also, yeah, the Danish Krona is pegged to the euro at ~7.45 so there is little incentive to switch over.
Nobody cares about inflation. They just need the right "democratic leaders". See Georgia. /s
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That's because of how US politics work. Less populous states have disproportionately higher political power. It's not a monetary policy thing. It's a core difference between US and European politics.
> The US also allows whole areas to deindustrialize
That's because Americans are free to live and work where they choose.
There's a lot more nuance here, if you look at Obama's memoir, he writes quite frankly about the dilemma of propping up the US auto industry with government dollars. When they (US automakers) asked for bailouts, he found them quite mismanaged, but if they went under a large portion of the US economy would find itself unemployed.
Considering its remoteness and population size, where Iceland sits today as country is an absolute success story. Don’t give up your sovereignty.
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I wonder in the coming years if we'll see the US actually become more like the EU. I expect there to be significant competition between Texas and California, in terms of industry, polity and philosophy. As the US continues to be internally fragmented politically, we're bound to see states compete actively, sometimes even to the detriment of other states. While we won't see a significant fragmentation like the EU, we will see a country that's so internally divided, there would be saboteurs and collaborators with enemies. We're kind of already seeing this, for example Texas and Florida shipping their illegals into Massachusetts and NY, states being firmly in the control of one party, with no room for switching governments, and the ever present question of states' rights.
Startups?
Their solution? Create an inner union of the EU countries that really matter (Germany, France, Beneleux ...etc). No I'm not making this up. It's not even the first time this idea was floated around. So to me it seems that the EU as a single block is almost finished.
I don't know how old you are but as a European with a passing interest in politics I have been hearing this at least every month for the last ~20 years. And I'm sure it was said long before then.
What you need to understand is that the EU exists, and has pretty much always existed, in a constant state of crisis. There is always some major disagreement, some urgent problem. This is just a consequence of the EU's existence as an attempt to unify (in some respects) 27 pretty diverse member states. The EU has survived all of these crises to date. I'm not saying it will exist forever, but I see no reason to believe that the current set of crises will be the ones to kill it. The EU may change but I think it will trundle on for the foreseeable future.
Also, there is already an "inner union", it is called the eurozone. Again... constant state of crisis.
you're drawing some pretty far-fetched conclusions here
Germany and France have always been the core of the EU (and its founding members).
Weird how everyone always forgets about Italy
https://en.m.wikipedia.org/wiki/European_army
https://en.m.wikipedia.org/wiki/Federal_Europe
You’ll notice it’s not exactly a clandestine conspiracy lol
That’s how it’s done: hard power and economic growth. Every empire in history had those two things. Europe has neither.
It’s even more true with the euro zone where some members are directly harmed by the high exchange rate.
It would make a lot of sense to go back to a smaller more integrated union with the countries which want it and leave the ones which only want the single market be part of a less integrated union.
Then again, considering Germany and France disagree about pretty much everything at the moment, I doubt it would go very far.
That option does exist, albeit in a bit of a roundabout way. Nothing is stopping a member country from leaving the EU and joining EFTA and the EEA afterwards. The fact that no country is seriously contemplating this is telling.
Our takeaway at the time was that this has to be the most effective billboard in the country as there is only one road between the major international airport and the capital.
I am still stunned that Brexit was left to a 50% + epsilon referendum.
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Also, as an European I know virtually no people opposing EU membership, when there are, it's generally less educated people thinking that the economy or whatever would be better.
Here are 2 recent reports
https://www.pewresearch.org/short-reads/2023/10/24/people-br...
https://encompass-europe.com/comment/clear-support-for-eu-me...
IMO the EU regulation doesn't go far enough as it excludes banning AI for "military use".
I hope to see even more "stupid AI regulation" in the future, fingers crossed.
Recently I benefited from a "stupid regulation" mandating minimum Internet speeds carriers need to provide. How dare the policy makers interfere with the extortionate prices every single ISP in the market colluded to impose on the population. Muh liberty!
Consider that icelandic mortgage interest rates are currently 9-11% but a few years ago they were 4% which was celebrated as historically extremely low rates.
If we join the EU we’re pretty much guaranteed to lose this exclusive access to our waters, and that will be devastating for the economy, given how the fishing industry is one of very few industries keeping the economy afloat. Especially considering exports to other countries.
The EU has an abysmal history of setting and managing ITQs in its waters, with Iceland having some of the best (but not at all perfect) managed waters in the world.
So there is plenty to be skeptical about when it comes to how negotiations would go on the matter.
No, this is mostly about fishing rights afaik. Britain also kept having issues on that front.
UK and Scandinavia got to opt out of the Euro, for example.
https://en.m.wikipedia.org/wiki/Whaling_in_the_Faroe_Islands
https://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_fi...
(Though, perhaps it helps that the UK is no longer in the EU).
What they would have been allowed or forced to do and whether their response could have been the same.