Eamon Gilmore (Dún Laoghaire, Labour)

The collapse of Iceland's private banking sector in October 2008 developed into a diplomatic dispute when the United Kingdom and the Netherlands insisted that Iceland guarantee bank deposits of their citizens held in the collapsed Icelandic bank Icesave. Both Governments provided loans to facilitate this guarantee and the dispute has since centred on the terms for repayment.

The Icesave dispute had hampered progress towards the opening of accession negotiations with Iceland. However, member states unanimously agreed at last June's European Council to proceed with the opening of formal talks. The conclusions highlighted the need for Iceland to address existing obligations such as those identified by the European Free Trade Association, EFTA, surveillance authority under the Agreement on the European Economic Area.

In a referendum on 9 April Icelandic citizens voted not to accept the terms of repayment negotiated between Iceland, the Netherlands and the United Kingdom. The matter will be now dealt with by the European Free Trade Association court. Both the United Kingdom and the Netherlands have expressed disappointment at the referendum result while stressing their commitment to recovering the loans. The Icelandic Government has stressed that the referendum result will not affect its application for EU membership. The European Commission, meanwhile, has described the issue as a bilateral matter which must be resolved outside of EU negotiation process. However, it is expected that the Netherlands and the United Kingdom will be reluctant to allow EU membership negotiations to conclude until the Icesave issue has been dealt with to their satisfaction.

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