Iceland, economic integration and the European Union

Iceland is a small resource rich country in Europe that is highly dependent of foreign trade. According World Bank classifications Iceland is a high income economy, but with a population of little more than 300 thousand inhabitants, it is the smallest economy within the Organization for Economic Co-operation and Development (OECD). Iceland is highly dependent of foreign trade, especially to and from the European Union, where economic and political integration is evolving and the question about the most feasible level of participation is a future challenge for the country. Iceland is a member of the European Free Trade Association (EFTA), the European Economic Area (EEA) and Schengen and European Union (EU) candidate country until recently, when its government decided to withdrew its EU membership application. The EEA agreement currently ensures Iceland’s access to the EU’s common market.