Meeting with Finance Minister Árnason of Iceland
I had a very constructive meeting with Finance Minister Árnason, who has an excellent knowledge of the EU both by academic training and by professional and political experience.
Iceland is confronted with important economic policy challenges resulting from the fallout of the financial crisis and a deep recession.
But the implementation of the IMF programme is on steady course. And important steps of stabilisation have been achieved: inflation and interest rates have come down, the exchange rate has been stabilised, and external deficits are lower. I appreciate the government's efforts to reduce the fiscal deficit and to achieve a primary surplus in 2011 through decisive measures. We see the 2011 budget as the government's commitment to continued fiscal consolidation and this is encouraging.
I appreciate that a mutually acceptable solution has been found on Icesave and that this was backed by a broad majority in the Icelandic Parliament last week.
The good achievements so far have been made under the cushion of extensive capital controls. The liberalisation of capital movements is an important EU requirement and needs to be tackled in a prudent manner. Therefore I welcome that the authorities are currently working on a strategy for lifting controls.
Iceland has timely submitted the first Icelandic Pre-Accession Economic Programme (PEP). This is an important step in the pre-accession phase, as it outlines the government's plan for a medium-term economic and fiscal programme, and the policy agenda for structural reforms to support the fiscal targets. The PEP will now be assessed by the Commission.
As part of the pre-accession process, we plan to hold a bilateral economic dialogue on an annual basis to exchange information and views on macroeconomic and structural developments in both the EU and the candidate country. This will be a formal framework for policy surveillance in the pre-accession phase. The first EU – Iceland dialogue could be held in summer or autumn.