Malta is set to lose its status as the EU's least populous member state after the European Commission gave its green light to the opening of accession negotiations with the Northern Atlantic island.

With a population of just 320,000 but a territory 343 times larger than Malta's, Iceland plans to call a referendum after the conclusion of negotiations, as had happened here.

Delivering its opinion on Iceland's application, submitted last year, the EU Executive acknowledged the island's adherence to the common values of the Union, such as democracy, rule of law and respect for human rights.

The Commission's opinion also identifies challenges ahead on the road to accession including changes to the laws on fisheries, on which Iceland is economically dependent.

The Commission's recommendation, known as the avis, will now need to be endorsed by the Council of the European Union before negotiations can officially start.

However, Commission sources said negotiations with the island should not take very long as Iceland was already considered to be in line with much of the EU's rule book.

To become a member of the EU, an applicant country must meet the political and economic criteria laid down by the European Council in Copenhagen in 1993 and adopt the entire body of EU law, the acquis.

The Commission said that through its participation in the European Economic Area (EEA), Iceland has already taken on a considerable part of the acquis. As an EEA member Iceland has participated in the single market for more than 15 years.

However, the Icelandic authorities need to make serious efforts to achieve full alignment with EU law in particular in the areas of fisheries, agriculture and rural development, environment, free movement of capital and financial services.

Iceland's bid for accession comes at a time of economic crisis.