EU monetary policies have always remained conservative in contrast to the "anything goes" dollar debasement strategies playing out Stateside. Yes, the EU and US are having a rough time, but it's the EU that recognizes throwing everything against the wall to see if something sticks in Cheneynomic fashion is not a viable strategy. In the US case, nothing is working unless the goal is piling on yet more IOUs on the backs of future generations to ensure debt peonage. Financial responsibility is distinctly un-American.
Now, the travails of Iceland's famously overextended banking sector racking up claims well in excess of the country's GDP are well-known. Suffice to say that, in this instance, the flinty claims of Euroskeptic backwardism came up against the rock-solid euro with the former yielding, as one would expect. It's a matter of priorities: how much does one value the convenience of debasing one's currency to become more "competitive" in typical Yankee fashion? Sooner or later, one tires of such cheap fixes and recognizes the value of using one of the last few examplars of real and not play money. From the Wall Street Journal:
After six days of grueling debate, Iceland's parliament voted narrowly Thursday to apply to join the European Union -- an institution from which the country long stood proudly apart. But a binge of overseas expansion by Iceland's buccaneering banks led to a towering stack of bills that couldn't be paid when the credit crunch cut off funding last fall, leaving Iceland with few options. Alone, with a currency that no one wanted to buy, Iceland's banking system went under. The measure passed 33-28, with two abstentions, and followed vigorous discussion on farms, fish and finance that reflects Icelanders' lingering misgivings about the regulations that come with EU membership.The euro is the trump card that wipes out any and all objections to EU membership. It is also what sets the EU apart from any other project aiming for regional economic integration. In a world of immanence, the euro remains a point of fixity. Hence, it has always befuddled me why some European countries delay membership when the rest of the world looks up to the EU example with admiration. Like Captain Caveman, I guess they've been trapped in ice too--frozen by outmoded ideas from a bygone era.
The country's new prime minister, Jóhanna Sigurdardóttir, elected after the financial crisis, made joining the EU -- and, eventually, the stable euro currency -- a priority. With Thursday's vote, she wrangled her own center-left party into line and cajoled support from parts of her usually euro-skeptic left-wing coalition partner and a handful of smaller parties. The right-wing Independence Party, which held power in Iceland for decades and long decried the EU for excessive regulatory zeal, wasn't able to muster enough opposition.
The prime minister's spokesman said Ms. Sigurdardóttir was "extremely happy about the outcome" and was on track to submit a formal application to the EU by the end of the month. "This is a historic day for Iceland," said foreign minister Össur Skarphédinsson, also a member of Ms. Sigurdardóttir's Social Democratic Party.
Iceland, which declared independence from Denmark in 1944, had until last year enjoyed a generation of prosperity and stability. But the financial crisis caused chaos in the country of 320,000. The collapse of the currency, the krona, cascaded into disaster for businesses and households who took foreign-currency loans, and for Icelanders accustomed to buying imported cars, food and building materials with kronur.
Iceland is likely to have an easier time with EU accession than other aspirants, such as Albania, which wrestles with poverty and corruption, and Turkey, whose large population of Muslims has caused consternation in France and Germany. Thursday, the EU commissioner in charge of enlargement praised Iceland's "deep democratic traditions."
But hurdles remain, among them an expected popular referendum on the matter and substantial concerns over the economic hit to the fishing industry from adopting EU quota and catch rules. Fish and seafood accounted for 37% of Iceland's exports in 2008. Even if all goes smoothly, accession is at least 18 months away, and likely more. After joining, Iceland would still need to meet stringent economic and currency-stability criteria [ERM II] -- which it is far from reaching -- before adopting the euro.