Those not familiar with it might find the history of the Cod Wars interesting (and very relevant to this discussion): https://en.wikipedia.org/wiki/Cod_Wars

[delayed]

Thank you for the clarifications!

Someone from Iceland tried to explain this all to me once, and if I understood correctly, it had less to do with the GDP (which also includes money circulating within Iceland) and more to do with the balance of trade, where fishing played a bigger role? But my information may have been misunderstood, or it may be out of date.

In any case, you have a stunningly gorgeous country and very nice people, and I wish you the best of luck in figuring all this out in a way that benefits Iceland.

If you join the EU you will lose control of your fisheries and have worse management policies pushed on you. Fantasy to think it will be any other way.

Icelandic ex-fisherman here:

Iceland‘s fisheries are controlled by what we call quota-kings. They are extremely rich owners of fishing quota (similar to USA’s oil barons) who are increasingly anti-social and obviously very unpopular among Iceland’s general public.

Iceland’s fishing system is kind of feudal in nature. People are allowed buy and trade and even rent fishing quotas. This means that the quota has accumulated into fewer and fewer hands of extremely rich individuals. The quota is then trickled down to fishing companies, and finally to fisherman, who have to spend a lot of money to rent the quota before they are allowed to fish.

This is a terrible system, and obviously the EU loves it (it even tried to copy it to solve the climate-crisis; and failed obviously). It fits smack into EUs neo-liberal trajectory. I don‘t think it is a fantasy at all the EU would adopt Iceland’s management policy at all. Nor do I think Iceland’s workers (including fishermen) have anything to worry about inside the EU. Trading ownership from our own feudal overlords to European bureaucrats would be a net positive in my books, however unlikely I find it.

That said I think it is unlikely Iceland will join anyway. Even if ‘yes’ wins. Iceland’s politicians have a history of ignoring the results of a national referendum if they don‘t like the results. They did this back in 2012 when the nation voted in favor of a new constitution (which relevantly would have actually transferred ownership of the fisheries to the Icelandic nation). A new government came to power and simply decided to ignore the results because their loved quota-kings would have lost power. I think something similar is likely to happen again.

Shared usage of a limited resource is a hard problem to solve.

Given the current system maybe the most honest one would be if the state ”owns” all the quota and then let fishermen bid for fishing rights.

But I have a feeling that will quickly become politicized with strange carve outs benefiting a few.

Bidding for rights is basically an ownership system already. Once you win a bid for a right, then you own the right.

Even if time limited?

So you bid for 5, 10 years or whatever becomes a good balance between stability to invest in the business and an agile market.

Yes, then you become a landlord for 5 or 10 years. Once the rights are given out by whatever method and set for 10 years, then anyone else who wants one in the next 10 years has to buy or rent one from whoever has one. That's landlordism.

But that would trend to cutting out the middle man due to the inefficiencies they create.

Middlemen will only work if either these middlemen make the utilization more efficient or you make the requirements to bid so onerous that only these specialized middlemen have the competency to do fulfill them.

No, middlemen would happen if it's profitable to be a middleman. Extreme case: one person bids just enough to get all the rights, then charges double that to fishermen to use them.

Which means in the next bidding round the fishermen would bid somewhere between the double they were charged, and could still apparently have a working businesses with, and what the middleman bid.

All it means is that they were expecting too large profit margins and someone called their bluff.

Has this been tried? It's been tried with housing (that's the current housing system).

No idea. But it is quite similar to how public transport works for archipelago ferries in Scandinavia.

15 year contracts when large investments are required. Otherwise 5-10 years.

And you get a ”quota” for a guaranteed traffic to run for that period based on the requirements in the contract.

Just took the same idea and applied to fishing, to prevent the ”legacies” from monopolizing it while giving the public the income of their shared resources.

A government contract isn't the same as a rights system. Presumably anyone else is also allowed to set up a ferry?

And anyone would be allowed to bid on the fishing quotas?

What’s the difference between a ferry and a fishing boat?

The difference is that there isn't a limited number of ferry licenses. They aren't rivalrous. Sure the government is paying for one to make sure there's at least one, but anyone could.

Of course they are rivalrous. Contracts change, boats get laid up and people are forced to change employers.

You can imagine on popular routes where you get to keep the proceeds that you instead pay for the right to operate it.

What’s the difference to paying for being allowed a quota to fish in the waters said ferry service runs a passenger service in?

Why would there be a limited number of ferry licenses?

Limited port capacity? Erosion? Limit disturbance of wild life?

Either way it is a public resource. On one side access to a countries fishing grounds to make money from it. On the other side access to a countries tax money to make money from it.

I get a feeling that you think fishermen should have some special heritage rights guaranteeing large profit margins rather than having to pay the public for the access to a shared resource.

Iceland already has fishing fees, which is effectively a tax to use the national resource.

If you introduce capitalism into the equation you are just opening the doors for the rich to exploit the workers in a systemic manner, and the workers in this case are fishermen.

Just do a standard fishing license you apply for and pay a nominal fee which can be refunded after some conditions are met, and then hand out quota evenly (or based on capabilities, history, etc.). Iceland already has a system similar to that called Strandveiðar for small fishing boats during a small window.

OR (and I like this better) ban trawling.

My personal opinion is that trawling should be banned.

Without trawlers shoveling up entire populations and destroying the ecosystem around it, a lot of these issues will solve them selves.

The problem is enforcement. The EU system doesn't work because it's not properly enforced. Spanish fishing fleets would regularly fish in British waters and Britain wasn't able to stop them, despite the rules.

This is a general pattern. The EU has many rules that are supposed to be enforced by its own institutions. But the attitude is very much to decide what rules to enforce based on ideological and political concerns, so the laws are largely meaningless.

EU member states can just ignore EU laws, as Hungary did for a decade. The EU is not sovereign.

Then why join

For the benefits

Yeah, and the number also is not of all exports, but of goods exports (as opposed to total, which includes both goods and services).

In 2024, fishing/marine products was ~18% of total exports, which is still a massive deal, but only half as massive. (I believe tourism, the largest "export", is close to 40% of total exports.)

I think the EU should make an exception, which also could draw Norway closer.

No high-income country has shown serious interest in joining the EU in decades. Norway is a hyper-privileged nation that already has several relevant treaties with the EU and has very little to gain by submitting to a system where the Balkan gets to vote on the measures Norway must implement.

Nobody wants to risk when things are going well, obviously. These countries do, however, have a huge number of bilateral agreements, so they find a lot of benefits in joining, at least partially, the EU. Norway already implement most of EU regulation without having any voting powers.

Is the top not an article about a high-income country expressing serious interest in joining the EU?

... expressing some interest to try and see if joining the EU might be feasible or not. That's literally what the referendum is about.

are there any more high-income countries in the European geographic area that haven't already joined?

Iceland, Norway, Switzerland, Vatican, Liechtenstein.

Switzerland is the only relevant one really. Norway is practically a member in all but name (Not all members use euros) and the rest are microstates.

Norway is a weird one... They have things like Schengen. But some how they are not part of customs union. While Türkiye is member of customs union but not Schengen...

This was not argued well during Brexit (what was?) but it was an issue there. As much as Brexit didn’t fix anything for anyone, I do believe the EU operates far too much in the interests of fishing boats and far too little in the interest of conservation and realistic fishery management.

So I think Iceland is right to be wary.

Yes. Ten years ago mackerel was cheap and abundant but the quota was set in excess of scientists' recommendations. Stocks are dwindling now (surprise!) and mackerel has gone from cheaper than tuna (for a tin) to nearly double. It's absurd.

Mackerel is a migrating fish which historically have caused difficulties in managing the fish stock. Between 2020 and 2024 there were no agreement between the nations that has been fishing mackerel in the north atlantic. Iceland was f.ex. fishing mackerel in their zone for 15 years without cooperating with other nations. I think there's an agreement between most of the relevant nations now, except Russia but Russia have a general fishing agreement with Norway which might include mackerel.

Anyway, managing fisheries sustainably is difficult as a lot of fish migrates across huge distances and a lot of fishing is done in international waters. Ideally you need binding agreements between all states bordering an ocean region, which can be difficult when the states are in geopolitical conflict with each other ...

Fishing was a big issue during Brexit, despite contributing less to the UK economy than Warhammer.

They export good music too (Bjork and Sigur Ros)!

The best part: https://en.wikipedia.org/wiki/Eurovision_Song_Contest:_The_S...

Why should it be a joke? Fire saga is beloved in Húsavík. My sister has this whole tour she does when we bring friends up.

And games.

Including a very healthy metal scene, Martröð (50 % icelandic) and Nexion were recent favorites of mine.

Meh, too pop. Hildur Guðnadóttir!

check out solstafir too!

Also Ólafur Arnalds. And Múm of course.

And GusGus

Gus Gus too.

And some of us still remember Greta & Jónsi, even out here in Australia.

And Jóhann Jóhannsson (RIP)

It's an existential threat not just to Icelandic economy but probably to the entire Atlantic ecosystem as a whole.

Despite what you might see a lot in the media lately the EU is not a military alliance and has explicitly no involvement in the military. So joining the EU is irrelevant on these issues.

The article mentions that sovereignty is a big issue. It should be because joining the EU means giving that up so that, I think, is the really crucial issue they should be thinking long and hard about (including, indeed, with respect to fisheries).

EU is indeed a military alliance. They are just no integrated command structures but this is common among most military alliances across the world.

SAFE credits are an EU military thing.

The mutual assistance clause doesn't oblige member states to support each other with military force even in case of aggression. A member can send blankets, food rations, or even just express diplomatic solidarity. Stretching definitions enough one can call it military alliance, but it is not in any practical form.

You are wrong https://www.bundestag.de/resource/blob/396620/0a70a7885e83ac...

Looks like I'm right. I don't read in German regretfully, but what I get with machine translation fully supports my point - national discretion allows for civilian or humanitarian aid rather than an automatic military response

Moving the goalpost out to "automatic military response" is not compelling.

I literally started the discussion from the point that "the mutual assistance clause doesn't oblige member states to support each other with military force" - quoting from the comment just 2 levels above.

So which goalpost is being moved here?

I started the discussion with the EU is infact a military alliance. You shifted the goal post by your counter argument.

Talking about EU politics you have to use non English sources sometimes. Why not auto translate them?

I shifted nothing, and as we are on the nets, everybody can verify it above. I said you can stretch the notion of military alliance to cover the EU, but because nobody's obliged to come to your rescue in force, in practical terms it is not.

Like if Russia lands on IS, there's no agreement to defend it even if it joined the union.

>Why not auto translate them?

I did, and I clearly mentioned it. And it supports what I said, isn't it? Can we please agree to read those letters in full, and not run to accuse me after finishing just the first sentence?

" nobody's obliged to come to your rescue in force, in practical terms it is not. " 1.) My source claims the opposite. 2.) This is the same for NATO and Mecca Pact practically. 3.) Actually a lot of lawyers see the EU article is more stricter than the NATO article. I trust them more than a goal shifting HN poster.

1. You are welcome to cite exact wording. 2. That's literally the first normal argument you expressed in the thread. I'm so delighted! NATO is practically very much different, cause it has tried-and-proven structures, drills, and more importantly American military behind it. Given the current state of affairs we of course can have our doubts, but during its existence there always has been a wide consensus, that the USA considers NATO members its area of responsibility, and are ready to act. And the alliance's Article 5 is way more obliging. Once agreed it forces members to regard themselves to be in conflict. 3. Good ones, bad ones, imagined ones? Care to show them?

Ad hominem doesn't make anybody look smart. Dishonest ad hominem, I guess, even worse?

I think a point is to be made that international treaties and alliances work on trust. They don't "oblige" a country in the sense that you may be obliged to do something.

Now the EU is not a military alliance per se and Article 42.7 (which was essentially sneaked in by the Lisbon Treaty) is a bit fuzzy so members will consider all aspects and offer some assistance, sure, but scramble their whole military because that's "all the means in their power", no unless they see that the threat to themselves is critical not least because the article also states that it "shall not prejudice the specific character of the security and defence policy of certain Member States". So basically some help will be sent but calibrated by all the usual political and self-interest considerations.

The relevant quote in the document is actually in English though.

So it does say required by all that is in their power. Whether that is enforceable is another measure, but that is true for a lot of rights.

OK, the Treaty of the EU does have a mutual defence clause but the military is specifically out of scope.

Considering the huge ramifications of EU membership in all areas it still does seem ridiculously onerous if you are "just" after security and NATO-like alliances.

Sovereignty is not a binary thing. And it's also not the case that not being a part of some structure makes you sovereign from it. In some cases it's the opposite - you need to conform anyway and have no input into the decision process. So as usual things are nuanced and not black and white.

As it happens sovereignty is a binary thing, at least when looked at domain by domain. Either you are sovereign or you are not, there is no half-sovereign.

The EU is going the federalisation way. Even now member countries relinquished sovereignty on key aspects: border control and immigration, monetary policy and currency, trade policy, and then a bunch of other things. This is hugely significant for a country.

This is just a referendum on talks so won't "seal their fate" but kudos to them for holding it.

If countries relinquished sovereignty on borders then can you explain how they are now controlling their own borders again to stop migrants?

Well there are not. And they did relinquish sovereignty on borders: Schengen means you do not control your border and we've seen exactly that over the years. This is factual, not an opinion. Even just free movement is a big reduction of sovereign border control and certainly of immigration (in effect you no longer have control of that). We can discuss the pros and cons but not the facts.

Yes they are, they are checking IDs are borders again.

Well, no they are not. And some very punctual, limited measures like Italy is doing right now for the show obviously does not mean they have control, as already said (and obvious).

Why don't you think they have control?

Iceland doesn't even have a military at all.

And yet they defeated the UK navy several times :P

IIRC this was done by threatening to leave NATO, which put pressure on the USA who really didn't want to lose a perfect base location to help monitor/contain the USSR, who in turn put pressure on the UK.

But this is from memory; and given the sources I read may have been politicised (I'm British by birth), take with a pinch of salt.

Nah, that wasn't it. It was done by Iceland having shorter supply lines and both sides not willing to start killing each other. https://en.wikipedia.org/wiki/Cod_Wars

The page you cite says it was due to the threat of Iceland leaving NATO etc.

They can easily implement a large no-fly zone across Europe, as demonstrated with Eyjafjallajökull in 2010.

Why would we (as an EU member) want Iceland to compromise on such a vital issue, though? I understand that it's simpler to have common regulations among all members, but when theirs works, why mess with it? It sounds unreasonable.

It could potentially open doors for other EU states to ask for exempts.

Well, they should, if they're reasonable.

No, the reasonable position is to hold everyone to same standards. Single market makes no sense if every country is being held to different standards.

A single market means a single market, it doesn't mean everything is the same in every country. Single market should mean that Icelandic fish can be sold anywhere in the EU, not that everyone can fish in Iceland without following Icelandic law.

The goal of the EU is to form a single economic area. Irish an I elandic fishers should be under same rules when fishing the same waters.

EU often is a mechanism to find a compromise (which makes the regulations so convoluted and bureaucratic ...), but too many special clauses to make a country happy means you got a similar debate on next subject.

One of the factors leading them to reconsider EU membership is monetary policy. The Icelandic króna is a very small currency that fluctuates considerably. Switching to the euro would protect them from exchange rate risks with their main trading partner.

One solution for Iceland would be to join the eurozone without becoming a member of the EU, as Kosovo and Montenegro have done. However, this would only be desirable if there really is a deadlock over fishing rights.

I love this diagram: https://www.reddit.com/r/europe/comments/1tda6wl/european_in...

There are so many treaties besides EU.

Is there any "western" values coalition? Like really adhering to them, not just the "free trade" lowest comon denominator.

> Is there any "western" values coalition?

I would claim (both by living in Germany and the posted diagram) that for each of these values, most share this value, but not everybody. The problem is that for each value, the stakeholders who do/don't share it can be different. So, a lot of agreements are very complicated.

This is also in my opinion a central reason for the rising anti-EU sentiments in many countries: the more is dicated from above in Brussels/Strasbourg, the more often it happens that in some group who has a really strong opinion on this topic strong anti-EU sentiments will become socially very accepted in this group.

The solution that I would thus propose to keep these anti-EU sentiments not to escalate would be to keep the areas where the EU has any influence to those areas

- where there is an insanely strong consensus over what is "right" vs "wrong" over the whole EU, and

- which are politically rather uncontroversial (i.e. the opposite of being a political minefield).

As a side note, you cannot escape values even when you are only considering "free trade". As an example, influential EU law cases include questions of promoting abortion as a freedom of service, ban on Sunday sales, ban on sex dolls ... Then free trade clashes with other fundamental rights, such as a right to strike. Arguably this tension is exactly the spill-over effect that made EU project successful – integration in one area (originally steel and coal for obvious post-WWII reasons) creates pressure in an adjacent area to integrate as well.

What does "western" values mean?

I don't, this is so hard to read. What is the blue box underneath the "updated"?

The left is "Europe" but below isn't labeled.

This is just unnecessarily hard to read.

That box is very clearly labeled “The council of Europe”. The label is on the left side of the box, right under the “Europe” label you mention.

They don't need to join the EU to use the euro. There are countries that use the U.S. dollar even though they're not the U.S. Sometimes it's just de facto use the dollar. There is technically a local currency and people use it when forced to but they would prefer the dollar. If you're a small country, something like the dollar or the euro is probably your best bet because of the stability it affords. The advantage to joining the EU is Iceland gets a little bit of input on how the euro was run versus if you use the dollar of the euro when you're not a member of their respective country you are partially tying your financial stability to something that you have no input or control over.

This means giving up all the advantages of central banking and is generally only done informally by countries experiencing hyperinflation without capital controls. It's a marker of a failed state.

I remember in live TV debates for the 2014 Scottish independence referendum, the Yes leader insisted that Scotland could not be prevented from using the Pound sterling. It's technically true, but a very, very bad idea.

Montenegro unilaterally uses the euro and it doesn't seem to otherwise be a failed state. Besides this being a "marker", what do you think are the actual problems caused? Like why does a small country need its own capital controls when there is a very stable currency available nearby?

The reason for your own currency is you can set your own interest rates to fit your local economy. If you are in a local recession while others are doing well you might want lower interest rates, while others need them higher. Both places are trying to make the same balance of inflation vs stimulating the economy - but they need different answers.

I'm not convinced it is worth it. Generally world economies are tightly tied anyway and so what is right for large currencies is close enough for everybody. The less coupled you are to the world the more important it is that you can be different.

Wouldn’t joining EU give up central banking in the same way?

It would, and this has been an issue even with bigger eurozone countries, like Greece.

Basically the same pressure that would have adjusted your exchange rates instead adjusts how much of the fixed-rate currency exists in your country. With fluctuating rates the pain of a financial outflow is more evenly spread than with a government running out of money, unless the government adjusts taxes to compensate.

> ”This means giving up all the advantages of central banking … It's a marker of a failed state.”

There are a number of countries/territories which have their “own” currency, but its value (exchange rate) is fixed directly to the USD:

• Hong Kong

• Saudi Arabia

• United Arab Emirates

• Qatar

• Jordan

• Oman

• Bahrain

• Panama

• etc

These are not failed states!

That's different from not having an own currency in use at all.

Not significantly. Your point that only failed states decide to use another nation's currency is automatically a failed state is simply untrue. It can be a marker, but it's not an automatic mark. Montenegro is not a failed state.

> It can be a marker, but it's not [...] automatic

Yeah, I think that is what it 'being a mark for ...' means. Otherwise it would be 'a property of ...' .

> This means giving up all the advantages of central banking and is generally only done informally by countries experiencing hyperinflation without capital controls. It's a marker of a failed state.

The US did not have a central bank until 1914. And there was zero net inflation from 1800-1914. The central bank introduced endemic inflation, which appeared immediately.

By design. Having a slightly positive inflation rate gives you a cushion against deflation, which tends to cause market crashes. A currency I can be confident will lose a couple percent yearly is more useful than one that might be worth wildly different amounts year to year.

If you scroll down a bit on this page, you can see the massive inflation/deflation spikes in ~10yr cycles that existed prior to central banking.

https://www.in2013dollars.com/

> massive inflation/deflation spikes in ~10yr cycles

A 1914 dollar is worth $33 today. Great job, Fed!

You're completely missing the point. The Fed did a fantastic job, because they could have given a pretty good estimate of that number in 1914. If you had asked someone in 1814 what a dollar would be worth in 1914, hell, 1824, they would have been guessing, and been wildly wrong.

Making sure that the nitwits stuffing their mattresses with dollar bills maintain their net worth is not the goal of our monetary policy, nor is a good goal. The goal is to ensure predictability.

To this end, we can model the price level at some point in time in a way similar to how we model compounding interest: P(t) = P(0) * (1.0 + r)^t. Take P(0) = 1.0, r = 0.032, and t = 2026-1914 = 112. Then, P(112) = 1.0 * (1.032)^112 = 34.05. We've had an average 3.2% rate of inflation in the price level over the past 112 years, give or take.

We can make certain assumptions that the rate of inflation won't be far off from this when we evaluate certain financial risks.

Just as in modeling adjustable interest rates for compounding interest, we can make r depend on t, and at that point, it becomes an ODE problem: dP/dt = r(t) * P(t).

Inflation is a tax on your money.

This betrays a lack of understanding of nominal versus real debt dynamics. (And also taxes, but I'll admit that my upbringing has probably given me a unique perspective on Caesar and what it means for us to be able to use his money.)

Of particular note, debt instruments are denominated in nominal dollars, and they're paid back in nominal dollars, but what concerns the creditor is the real value of those nominal payments. Economic growth has this pernicious habit of pushing nominal prices upward, and if the money supply and credit system don't grow commensurate with the resulting increased demand for liquidity, the real burden of existing nominal debts can rise sharply and unpredictably.

This means that borrowers can find themselves underwater on, e.g., mortgages while the nominal obligations remain fixed, and banks will swiftly foreclose on them and tighten credit when considering their balance sheets. Many of the panics of the 1800's included a lot of this very dynamic.

It's a very bad time.

They don't give up the advantages of central banking at all.

What they give up is political control of their bank. There are advantages to having political control, but often political control is abused - which is why failed states have given up on it as part of their efforts to rebound. The US and EU both have controls in place to limit the power of politicians from making changes for political reasons.

If the króna fluctuates so much, wouldn't that also indicate that demand for the króna just fluctuates a lot? Presumably, in absence of major conflicts between Iceland and its trading partners, as a result of economic imbalances. Those won't go away if Iceland were to join the eurozone, either as a EU member or via the Kosovo/Montenegro route. It might deprive the Icelandic central bank of a valuable tool to stabilize their economy, by weakening or strengthening their currency as economic circumstances demand. This was a big problem for the southern EU economies back in credit crisis times.

Now there are of course many other considerations that might offset this downside to joining the eurozone. I would personally welcome our Icelandic friends joining the EU (if they chose to), but it's good for them to have a public debate about both the up- and downsides first.

> If the króna fluctuates so much, wouldn't that also indicate that demand for the króna just fluctuates a lot?

Yes, relative to the size of Iceland's economy. Average daily ISK turnover on the interbank market is only 4 or 5 million EUR [1]. A single commercial transaction, like the purchase of a new trawler from abroad, can easily be worth 2-3x that amount and cause the exchange rate to spike due to the lack of liquidity.

[1] https://cb.is/news-and-publications/article/interbank-market...

> Presumably, in absence of major conflicts between Iceland and its trading partners, as a result of economic imbalances. Those won't go away if Iceland were to join the eurozone, either as a EU member or via the Kosovo/Montenegro route.

Part of it would. There is a cost to maintaining your own currency that can drag down the economy.

Counterfeiting is an obvious one, getting software and markets to support is another one, but what parent above you is likely arguing against currency speculators/manipulators.

You need to defend it to keep it relatively stable so it stays as a store of value or your companies will just use dollars or euro anyway. If your currency is so small a firm in New York can force your currency to change by 50% in a night, regardless of the fundamentals of the businesses who use the króna, you have a problem. Using the Euro also means businesses do not have to pay conversion costs or deal with additional accounting issues for tracking the fluctuations in the currency.

Iceland had a debt crisis from 2008-2011. Part of the issue is the currency is small relative to global markets, so investments/speculation/shocks from elsewhere have an outsize impact.

https://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_fi...

To be fair it wasn’t just Iceland? It was a global crash. At least that was my perception at the time.

But we recovered from it very quickly, and is often talked about. But we had currency exchange restrictions for quite some time to fix it. It worked.

Yes. For Iceland it was different than the Mortgage crisis elsewhere. (It was currency gambling)

A small boat will jump up and down in relatively small waves, while it takes a huge storm to destabilize Oasis of the Seas.

And the króna is a very small boat.

Not sure how it would affect home mortgages but the majority of icelanders are on mortgage plans that the principal remaining rises with inflation(I forget the name, I left a few years ago) - and will never likely pay them off.

Not quite true. The ratio fluctuates with the market conditions. Figure https://sedlabanki.is/library/?itemid=d2527537-11bc-4aca-944...

Verðtryggð loans are popular when economy is hard, people can enter the real estate market.

Once things go in the opposite direction people change to Óverðtryggð lán.

As I understand it, Kosovo and Montenegro adopted the Euro unilaterally, without agreement from the EU. I don't think that'd be (politically) possible for Iceland (?). So the EU would need to agree to this, which also doesn't seem politically possible (?)

There are a whole host of microstates and more or less autonomous overseas territories that use the euro. If Mayotte can use the euro even though the island is on the brink of collapse, I don’t see why that would be a problem for Iceland.

I don’t think this is a problem for the EU – quite the opposite, in fact. It strengthens the euro’s position in international trade, increases the number of users and boosts the volume of trade. More customers for the EU’s financial services sector.

There are a number of countries that unofficially use the US dollar as their currency for major transactions without asking anyone’s permission (Cambodia come to mind).

> If Mayotte can use the euro even though the island is on the brink of collapse

Isn't Mayotte part of France and been for quite some time? I'd guess they switched to the Euro together with France and all the other French territories, but maybe I'm wrong?

Yes, Mayotte is very much part of France.

Monaco, Vatican and San Marino are however sovereign micro-states that switched to the euros because they already had a monetary agreement with France or Italy.

Also Andorra, which has an agreement since 2006 to mint their own Euros.

There’s also Ecuador who officially uses the USD as their currency.

And Panama!

Well, it doesn't require EU's approval by definition. Because it means just unilaterally handing out EU a lot of cash.

Why would they need permission to use a currency?

Kosovo and Montenegro adooted the Euro unilaterally, but various micro countries use the Euro through special treaties (Monaco, San Marino, Vatican etc). Iceland is 10x larger but this in principle possible.

Not sure for a small country like Iceland if it make sense to use Euro over having control over their currency. Things could get super expensive overnight and it would work when things are smooth, but in current political climate you never know when the next financial crisis going to happen and don’t think they want Brussels to dictate their monetary policy

You obviously haven’t been to Iceland. Things already are extremely expensive.

Converting to Euros would make it more expensive. Daily groceries could become a luxury

Joining the Euro is not the panacea that everyone thinks it is.

It comes with some major drawbacks: - no control of interest rates since these apply to everyone in the Eurozone regardless of the current economic situation of a particular country. - no more devaluation to get back some competitiveness on international markets - strict financial guidelines in theory (3% deficit max per year and 60% of GDP/debt ratio)

Finally, the biggest problem as it's been highlighted by many economists is that it spreads the risk to the whole Eurozone which sounds great in theory until you find yourself drowning in debt like Greece was in the 2010s or like France is nowadays.

Because now your government is borrowing in Euros, the markets move very slowly and the full impact of the finances of any Euro government is completely subdued since in the pool of countries that use the Euro there is Germany which is very good and very trustworthy creditor.

Take a look a what happened with Liz Truss in the UK, she made some rather stupid announcements and the markets reacted as they should and that lead to her removal and to a change of plans.

In France by contrast, no such changes have happened despite the fact that the French economy has been going downhill for awhile due to their 5%++ yearly deficits and their 120% debt ratio.

If France still had the Franc, then the markets would have forced the politicians in charge to either course correct and/or eventually to pass on multiple painful but necessary reforms.

Instead what we have is complete political paralysis and many presidential candidates are openly calling for a roll back of more pension reforms, lowering the retirement age to 60, increasing the pay of all the civil servants by 20% and more complete out of control spending.

The supposed EU fiscal rules have never been enforced anyway which means that countries don't really have any incentives to curb their spending since the ECB is always backing them.

Note that a lot of that stuff still exists when you have your own currency, but it gets absorbed into exchange rate movements instead of being an explicit decision. This is both a blessing because it automatically balances, and a curse because you can accidentally shift it in an unwanted way and it may be hard to notice you're doing so.

For instance you can have a different interest rate when you have your own currency, however it will cause your currency value to shift over time in opposition to the interest rate difference. For instance I think New Zealand had 6%ish rates while the mainstream was 3%ish, as a result the NZ dollar devalued by 3%ish per year. If they wanted a stable currency value, they would've had to maintain interest rates comparable to their trading partners. The fact this isn't happening to Japan is a great mystery to economists because it normally does happen.

I agree that interests rates between trading partners have to somewhat match but the issue here within Europe is that Germany is so big that by default what they say goes.

So, if you have Estonia that is in a slump and needs a boost, it can go to the ECB and say, look we need to lower the interest rates but if Germany is happy with the current rates, the likelihood that Estonia gets its way is basically nil.

Right now Germany is feeling the pain and despite the inflation picking up above the 2% target rate again, the ECB has not raised the rates further, why? My hunch is because Germany can't afford it and neither does France.

A monetary union is great on paper, in reality the big fish still eats the small fish. The only difference is that the small fish can try to do something outside whereas in the union it just goes along and hope for the best.

Finally, another big issue with the Euro is that there is no fiscal union between the states. So if a state like France struggles then if a federal Europe was to happen, the states who have money would give it to France in forms of tax transfers but doing so punishes the countries that have made the reforms, that have invested, that have saved money and reduced their deficits and will only incentivized countries which have not done so to continue having deficits in the future.

How would a German politician or Austrian politician explain to his/her constituents that there is no money for new schools or hospitals but there is cash to bail out Italy or France for the nth time because these countries have refused to do what was necessary to reform their country?

In any case, since the exchange rates are no longer providing the feedback that the markets used to give by repricing the currencies that existed before, the markets now use the interest rates of the debt as proxy for their confidence in each European state. Right now, there is a 85bp difference between France and Germany and its widening as time goes on so something will have to give soon.

Either the ECB caves and lower the rates which can increase inflation or France risk triggering a Euro crisis that will be much much worse than the Greek one.

And since a lot more countries are now in the Euro compared to the 2010s, the spread of the crisis will be greater by default.

Why can't Greece just default on its debt? When you can't paper over your insolvency with currency devaluation, you can still be insolvent but you have to deal with it in more overt ways.

They could but then nobody would lend them more euros. If you default in a situation of structural deficit where you can't print more money, then the only alternative is instant spending cuts to balance the budget.

During the 2010 debt crisis there was much talk of profligate Greece being "thrown out" of the euro zone. In this dark scenario Greek civil servants would get their pay rises in worthless drachma, but Greek homeowners would be left with unpayable euro mortgages. But nobody ever talked about the Montenegro option (similar to Ecuador and USD). I never understood this. What was stopping Greece from defaulting and keeping the euro anyway?

> Greek homeowners would be left with unpayable euro mortgages

Just fyi, Hungary had a ton of homeowners with loans in EUR and CHF and when the HUF collapsed the rates became untenable and the government just said "eh, fuck the banks, let's keep the previous exchange rate". The banks survived too.

It's a hard political decision but not an impossible one.

(Disclosure: I deeply disliked that government for other reasons and didn't have a loan, it was just interesting to see populism in action without obvious downsides materializing)

The Greek state didnʼt just need to get rid of the huge amount of old debts (what a default would have been good for) and was not interested in the currency in itself (keeping the euro outside the euro zone) but needed a lot of more money: new loans and the further payments for being in the euro zone.

This money was needed for public expenditure and to keep the Greek banking system running.

The biggest creditor banks of the Greek state were, in fact, Greek (ca. 50–60 bn. Euro).

The biggest foreign creditor banks were French (ca. 42 bn. Euro).

Accordingly, France was for more financial support (for Greece) to be payed by all EU member states.

The German banks were only a distant third (ca. 25 bn. Euro). But the German state was the biggest donor among the EU member states.

That is why Germany and some other net contributors e.g. the Netherlands were not too keen on keeping Greece in the EU zone at all costs. For them, the solution you named (“defaulting and keeping the euro”) would have been the rather advantageous, but not for Greek nor for other powerful member states. Nor for the Greek oligarchs – remember, Greek is a country of only about 10 million people who were not that well off – in whose hands may have ended most of the 360 bn Euros of the old debt? They liked the toxic fairy tales Varoufakis was telling (married to a member of the Stratos family).

Look into who they were the debtor to. Turns out that a lot of German banks would have needed to scrap debt from their books.

So a Greek default would have created an EU political crisis. Greece would have been in the doghouse. Perhaps the other members would have suspended its structural funds, or even voting rights. Seems impossible it would have been thrown out of the EU, there's not even an obvious way to do that. All very unpleasant, but then there was clearly an upside for Greece. It just seems interesting that the scenario was never really entertained or gamed out in the media.

It was though? I remember a default being a real option in the media.

But in the end, it was clear that unlike in Iceland, bankruptcies were not considerable, and so a bailout was going to happen. The only question was how the bailout would be structured.

Yanis Varoufakis made his name back then by going against the grain and proposing a hairsplit, but instead an approach was chosen where Greece never really defaulted, but its population was harshly punished for it.

A default plus Greece unilaterally continuing to use the euro was the scenario hardly ever evoked.

Indeed so: the term “Brexit” was a comical extension of the original “Grexit” at that time.

> profligate Greece being "thrown out" of the euro zone. In this dark scenario Greek civil servants would get their pay rises in worthless drachma, but Greek homeowners would be left with unpayable euro mortgages

That was indeed the "mainstream media" (I so hate that expression but it does apply) opinion. The reality is more prosaic: German (and French, but mostly German) banks would be screwed if those debts were defaulted upon.

Look at the GDP per capita of Greece since 2010. Looks like staying in the Eurozone didn't do them much good either...

comapre with the trajectory of the GDP per capita of argentina. i think staying in the eurozone did help them

It's supposed to go up, huh? It's back where it started, so there's that...

https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...

The whole point of leaving the Euro would have been so the government could continue to pay its civil servants and other bills by printing the money. It would also have used printed Drachma to buy Euros and use those to repay its debts.

Reintroducing the Drachma was a "solution" to the political problem of cutting spending by creating hyperinflation, not anything else. So it makes no sense to default and keep using the Euro. The reason for defaulting is because you don't have enough euros....

Can they become part of the eurozone without joining the european union?

Yes their currency suffered a lot in 2008, they would have been protected if they were using the Euro at the time

You can just voluntarily adopt euro. Montenegro isn’t officially in the eurozone. They just unilaterally adopted it.

The problem is if you let your debts run too high then you can’t print your way out the problem.

Very few countries seem to have the fiscal discipline to make joining the euro a sensible option.

You need a desirable currency for that to work. Not every currency has a volume like the USD and Euro.

But then what currency would they use in eve online? How could we replace all of the iskies memes

> One solution for Iceland would be to join the eurozone without becoming a member of the EU, as Kosovo and Montenegro have done.

This only makes sense if the primary concern is native (Icelandic) politicians being unable to responsibly manage their currency. Otherwise, there's no advantage over just maintaining a stable exchange rate with the euro.

Well, Kosovo and Montenegro haven't joined the Eurozone. They just use the Euro, but they have no influence in the monetary (?) policy.

Edit: I'm not the first one to point this out, so to add some new information: both of them used Deutsche Mark prior to Euro, Montenegro even under the union with Serbia.

An at various times others have done the same with the USD

> and membership in the fraying NATO military alliance

That framing is.. strange.

One member of NATO has lost the plot. For everyone else, it’s stronger than ever.

If the US tries to attack a NATO member they’re going to find out just how serious the alliance is.

For example, Maersk shipping line in Danish, and carries 15% of the world’s shipping containers. If the US were to invade Greenland it would be illegal for Maersk to keep doing business with them. It’s unlikely NATO members will fight the US with bullets and bombs, but I guarantee they can still seriously hurt them. All NATO members selling all their US treasury bonds instantly would also be devastating.

> It’s unlikely NATO members will fight the US with bullets and bombs, but I guarantee they can still seriously hurt them.

I am not even sure the US would be able to completely dominate a conflict. While it obviously has the largest military, it's set up to depend on European military defensive and complementary roles in a large scale conflict. In particular US aggression supply and comms critically depend on Europe as ally. Not to mention nuclear defense and early warning infrastructure. Without Europe, there is a big, big ocean between the US and most everything.

For example in terms of military roles, the US lacks the stealthy submarines of European navies. Incidentally, it relies heavily on aircraft carriers for force projection. I think there is a chance European subs could wipe out US carriers and therefore significantly disable US attack abilities straight-away. There is evidence from prior combined exercises, where the US navy was pretty much owned by a single Swedish sub. They are really damn good. So, without deploying ships, what's the US gonna do? Bomb Greenland's tundra? Fly big, slow transporter planes there and hope the European subs won't use their AA missiles? The whole point of those subs is to be a massive pain to aggressive forces and the US assigned that role to Europe...

War against Europe means losing comms and nuclear defense/early warning infrastructure located there. The US would also immediately become vulnerable to Russia and China, and every conflict in the middle east too.

I think attacking Europe would be pretty idiotic from every perspective. Sadly, that doesn't mean much anymore.

> I am not even sure the US would be able to completely dominate a conflict

While everything you said may be correct (I’m not an expert), I doubt NATO countries want to get in an energetic war with the US. It’s simply so costly in lives and resources and effort.

Hypothetically if the US “takes” Greenland I fully expect all the NATO countries to declare war on them (as article 5 requires), but not attack with military.

They’ll sell all their bonds and completely shut them out as if they don’t exist. Zero trade. No tech. No services (google, apple, etc). Not a single thing in or out to/from the us.

Yes it would really suck for every country, but I suspect it would suck less than either slowly letting the US walk all over them and slowly take any country they want, or an energetic war.

The US is putting its head in the sand and going backwards on renewables and vehicles and science and tech and so many more things. They’ll become an island if this happens.

I don’t put it past trump to try. It’s exactly the kind of “emergency” he needs to give himself emergency powers and stay in office indefinitely.

There would be tripwire forces located in Greenland. The US would likely be required to directly engage European troops. I would expect Europe to let the carrier know it got no chance before it even starts shit, in the above scenario. Like when the US under Biden surfaced a nuclear triad sub in the Baltic Sea to dampen Russia's nuclear threats against Europe, early in the Ukraine war.

Not sure Europe could afford to abstain from a military response after being actually attacked. It would look extremely weak, disrespectful to their attacked/fallen troops and puts their military deterrent in question globally. You can wreak the economy only once cutting ties with the US and it got more impact domestically with a costly war starting. To deescalate, US society's pain expectations must max out immediately, before the people, media and economy can adapt to a new normal/narrative. Look at Ukraine, a slow, reluctant response makes everything worse. If Europe/US had maxed out their support immediately, Russia would have like pulled out. Years of extreme pain must be the message, another costly war dragging on forever, something Americans understand and feel tired of.

And I presume Canada would also not be too pleased, potentially having to up the stakes for a war in their neighborhood. A war which may just as well have fallen onto their own soil. It would be wise for them to stand with Europe, if they want to keep their own independence.

The US military leadership actually having to plan an all-out war with Europe, possibly Canada, may prompt some introspection and a chance for internal conflict. Rumor has it, behind the scenes, the US NATO generals already apologized to their European counterparts for Trump's remarks on Greenland. There is probably a non-zero chance, any attack order would cause a coup rather than a war with Europe. Domestic revolt will only happen, if such conflict is credibly the stupidest thing imaginable on every axis and when relevant actors are actually confronted with that reality.

> It would be wise for them [Canada] to stand with Europe, if they want to keep their own independence.

NATO article 5 says they have to.

And I have no doubt they would. There is only one country that is reneging on their commitments. It ain’t Canada.

No one knows what NATO even means, if the US of all countries attacks a member state. Eg. there is no legal procedure for the US to leave NATO. There isn't really a NATO without the US. Although many countries would be advised to stand by the general idea of collective defense to ensure protection against other big players, following through is anything but certain. Therefore article 5 obligations are not particularly straightforward in this case.

That's why merely the US rhetoric is damaging to the deterrence function of NATO (and global peace, nuclear disarmament for that matter). It's different for the EU, because the EU membership itself has collective defense obligations in case of attack. The EU got lucky France had an independent nuclear program, as we can't really count on the UK anymore, because they are not part of the EU anymore and also depend on the US technologically. That said, countries like Germany are expected to be able to gain nuclear capabilities quickly, if they have to.

I'm sure that the US and EU are both able to seriously hurt each other a lot. That's also incredibly dumb, and will only help all the other powers in the world.

They have been doing fine for more than a thousands years, no need for fear mongering.

The thing is, perhaps they'd be more successful in exporting other things if they were part of the EU.

Not if everyone else starts fishing in them. Take a look at the Common Fisheries Policy. It effectively means everyone else in the EU can show up and fish for it themselves, potentially undermining the export revenue and (more importantly) severely disrupting all the work they've done to make it sustainable.

the article:

>its fishing and marine industries make up almost 40% of exports.

you:

>Iceland's fishing industry makes up something like 40% of their exports

here we can see how a very small... re-framing (let's be charitable to op) completely changes the argument and subtly promotes a certain... viewpoint (again, let's be charitable and not call it an agenda)

Why do you say NATO is fraying? Because of Russia, NATO has increased its membership, increased military budgets, and increased European military cooperation. It probably has never been stronger.

The US keeps talking about leaving.

I hope that Trump doesn't represent US policies in the long term.

Trumps short term actions will have long term consequences on the alliance. Specifically on how the alliance views reliance on the US. Trump has shown how unreliable an ally the US can be. Putting that cat bag in the bag doesn’t reverse the realisation that there’s a cat in that bag.

This will likely strengthen NATO in the long term. But only if it doesn’t get tested by Russia in the short term.

It's probably for the better over the long term, I Agree. We might be getting into complicated times, with AI and robotics, so it's much better if Europe would be more self-sufficient, militarily, technologicaly and economicaly.

There are approximately 874 days left in Donald Trump's presidential term as of August 29, 2026.

That's if the bugger leaves office and doesn't start an insurrection like last time, and that the insurrection doesn't work like last time. Depends a lot on how much Americans actually want him gone, but alas you Americans seem to keep voting for him no matter how many corruption scandals he's in.

I think the majority of “you Americans” that you’re talking about aren’t on HN. The Americans actually on this platform probably have the same concerns you do.

Any time I try to engage with any American on Trump it's always the same "it wasn't me" spiel.

Is anyone over there taking responsibility?

I hope this finally motivates the Europeans to step up their game long-term. They should be able to defend themselves without the US and also develop and produce their weapons within Europe. NATO will be better if it's an alliance of equal partners.

They'd be better off trying to align themselves neutrally and dropping NATO.

> Which is the only way a tiny island nation can afford essential imports.

Shouldn't the imports become cheaper once they are in the EU single market though?