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Iceland's government supported the proposal of Foreign Minister of the country Gunnar Bragi Sveinsson to drop the plan of joining the EU. The night before both the Progressive Party and the Independence Party reached an agreement to withdraw its application for accession to the European Union, Icelandic State TV and Radio Broadcasting Service reports.

The government also decided to cancel the referendum on whether to continue negotiations with the EU.

"In 2009, our former Foreign Minister suggested to submit a formal application for EU membership, so it was done. Quite naturally, I made a proposal to withdraw this statement," Sveinsson said to Icelandic reporters.

There is not much of a surprise in this outcome. Negotiations between Iceland and the European Union have been suspended more than a year ago. The center-right government that came to power in April has openly stated that it does not support the project of joining the European community, which their socialistic predecessors tried to realize.

In September, Foreign Ministry of Iceland dismissed 10 negotiating groups, advisory committee and national delegation, which had been working on issues related to the possible entry into the EU for the last four years.

A few days ago the local Institute of Economic Research presented the government a 800-page report which assessed the current situation in the EU and the potential consequences for Iceland in case it joined the union.

Most experts suggest that the euro integration is currently not profitable for the country and could cause a severe blow to the Icelandic fishing industry and farming enterprise.

The so-called "Mackerel war" played a significant role in aggravation of contradictions between Brussels and Reykjavik. Due to recent ocean warming, fish shoal go north to the shores of Iceland and the Faroe Islands. This works in favor of local fishermen, whose profits multiplied. Brussels brought impose sanctions on the Faroe Islands, prohibiting the import of local herring into the EU, and threatened to do the same for the Icelandic mackerel or scomber. It is worth noting that fishery amounts to 90% of the economy of Iceland.

According to public-opinion polls, more than 60% of the 320 thousand Icelanders currently oppose the European integration.

However, Icelandic supporters of European integration argue that the adoption of the euro as the main currency will help stabilize the national economy.

Iceland's financial problems began in 2008, when the three pillars of Iceland 's banking system crashed, leaving creditors to face € 3.5 billion debts. The government initially agreed to follow the requirements of the IMF and to pay the debts of its banks, but then rejectedthem, motivating it by public uproar. IMF froze crediting, and the European Union threatened to impose sanctions on the "revolutionaries".

Disagreeing on the strong requirements of the IMF, Iceland struggled with the financial crisis with its own methods. Depreciation of the national currency (króna) against the euro increased the competitiveness of the Icelandic economy and improved the external payments position. With IMF Iceland managed to patch up a friendship with IMF by making minor concessions: spending faced minor cuts and taxes were raised.

Voice of Russia, TASS