EU invites Iceland to membership talks

European Union leaders agreed yesterday to open membership negotiations with Iceland despite differences over whale hunting and a bank collapse that hit British and Dutch investors.

European heads of state and government meeting in Brussels gave Iceland candidate status less than a year after it applied to join the 27-nation bloc.

"It's a great day for Iceland," said the country's ambassador to the EU, Stefan Johannesson.

EU leaders agreed in a summit statement that Iceland "meets the political criteria" and "accession negotiations should be opened."

However, the text also spoke of "areas of weakness... including in the area of financial services," while welcoming Reykjavik's "commitment to address these issues."

Britain and the Netherlands said the talks should go hand in hand with negotiations over demands that Iceland reimburse compensation paid out by those two countries to citizens who held accounts at the failed Icesave bank.

"My government is fully committed to resolving this issue," Mr Johannesson said. "It's a bilateral issue."

Dutch Prime Minister Prime Minister Jan Peter Balkenende said that while his country wasn't blocking the start of Iceland's membership negotiations. "before it can become a member, it will have to fulfil its obligations toward Britain and the Netherlands."

The Icelandic authorities will also have to make extensive moves towards shutting down their controversial whaling industry before they can think of taking their seat in Brussels, as European rules ban whale hunting.

Iceland's application to join the European Union and adopt the euro as its currency, which it lodged in July 2009, could also stumble on the issue of access for European fleets to Icelandic fishing waters.

But potential problems are not only with its would-be partners.

An opinion poll this week showed a substantial majority of Icelanders want their government to tear up the EU application form. A national referendum will have to be held before Iceland can join the EU club.

In a March referendum Icelanders massively rejected a deal to pay Britain and the Netherlands billions for their losses in the collapse of the Icesave bank.