High prices, more than Trump, fuel Iceland’s interest in the EU

Icelanders go to the polls this Saturday to decide in a referendum whether this North Atlantic island, which for decades has preferred not to be part of the European Union (EU), will resume negotiations with Brussels for a possible accession to the community club.

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The result is expected to be very close. According to the latest poll, published Wednesday by the newspaper Visir , a narrow majority of 51.3% is in favor of sitting down again to negotiate with the EU, compared to 48.7% who are against it. But no one in Reykjavik dares to take the victory of one side or the other for granted.

Although the expansionist appetite of U.S. President Donald Trump for neighboring Greenland has affected Iceland’s view of its own security and defense, geopolitics has been relatively absent from the campaign, both for and against. More immediate and tangible issues, such as reducing inflation and high prices – as supporters of the yes say – or defending fishing and national sovereignty – the main arguments of the opponents – will probably tip the balance.

The high cost of living and the volatility of the national currency, the Icelandic króna, are present in all debates. “We live in a country where mortgage interest rates reach 8% and 9%; it is a very high rate, in the eurozone the average is around 3% or 4%. That disparity of up to 5% makes a big difference for many Icelandic households. Solving this is one of the benefits I see of a possible accession to the EU and adopting the single currency,” says Pawel Bartoszek, MP of the Liberal Reform Party, partner of the tripartite government of Social Democratic Prime Minister Kristrún Frostadóttir.

In an interview on Thursday at the Althingi, the Icelandic unicameral parliament, the liberal MP elaborated on the shopping basket. “We are a rich country, so living here will always be relatively expensive – admits Bartoszek – but food prices are excessive, they are higher than they could be. When Finland and Sweden joined the EU in 1995, food prices fell by around 25% in the following decade, something that did not happen in Norway or Iceland, which joined the European Economic Area but not the EU.”

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The price hike is due to lack of competition, the cost of transporting products – half are imports – and currency volatility. According to an analysis by the academics’ union Viska published in May, Iceland has become one of the most expensive countries in the world, with prices higher than those of Switzerland and 84% above the average of the 27 community countries.

Even in technically affordable supermarkets like Krónan or Bónus, the prices of products on the shelves hurt the pocket. Yesterday we saw a kilo of peppers for 700 krónur (five euros), a pack of ten eggs for 1,075 krónur (7.6 euros), and a half-kilo loaf of bread for 655 krónur (4.6 euros). Even the iconic Icelandic hot dog, a paradigm of fast and cheap food, has become more expensive with inflation. From costing the equivalent of 3 euros a few years ago, it has risen to 6 euros or even more.

On Thursday, the national statistics office (Hagstofa Íslands) reported that inflation has reached its highest level in two years. Consumer prices grew 5.6% year-on-year, the highest since August 2024, with increases mainly in housing, food, and transport. Opponents usually reply that wages are higher in Iceland than in the EU: here the lowest salaries are around 3,000 euros gross per month.

Nevertheless, the pace of price increases already bothers all pockets. Iceland applied for EU membership in 2009 due to the financial crisis, but in 2013, the then new conservative government froze negotiations. It remains to be seen whether now high prices will influence enough to overcome in the referendum those who fear for the future of fishing.

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