EU May Provide Iceland with Financial Support Skip to content

EU May Provide Iceland with Financial Support

Icelandic officials are currently in discussions with the European Union on financial support for Iceland in the form of loans and grants. The initiative came from the EU in October 2008, shortly after the banking collapse.

In the past, the EU has granted so-called Macro-Financial Assistance (MFA) to states that are in close cooperation with the EU and suffering severe economic difficulties, Fréttabladid reports.

According to information from the EU’s Embassy to Iceland, which is located in Norway, an MFA loan to Iceland has been in preparation for some time. The loan requires approval from the EU Ministerial Council and the European Parliament.

European Commissioner for Enlargement Olli Rehn confirmed during his presentation at the University of Iceland last week that an MFA loan to Iceland was being discussed.

Urdur Gunnarsdóttir, the information officer at Iceland’s Ministry for Foreign Affairs, said these discussions aren’t negotiations as such since the initiative came from the EU. The discussions are taking place in the same manner as with other states in a similar position as Iceland.

Sveinbjörn Hannesson at the EU Embassy said the MFA loan is intended to support the loans granted to Iceland from the International Monetary Fund and other EU member states.

Hannesson wouldn’t mention any amounts in that regard but said the loan would be similar to that granted to Hungary, which was EUR 6.5 million (USD 9.5 million) in addition to EUR 12.5 million (USD 18.3 million) from the IMF.

The EU has also granted Instrument for Pre-Accession Assistance (IPA) to states that have applied for membership to the EU, as Iceland did last summer. Such financial assistance is intended to develop society’s infrastructure and ease the adaptation to the EU and is, for example, granted to support rural areas.

Hannesson said it won’t become clear until 2010 for which type of IPA assistance Iceland can apply.

Click here to read more about Rehn’s visit to Iceland.

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