Joining The EU

Iceland enjoys full access to the EU's internal market through the European Free Trade Association and the European Economic Area, and also complies with most EU laws, officials said.

"This means that it would have a lot less homework to do than other applicants from Eastern Europe. Its membership bid would be faster," Krisztina Nagy, spokeswoman of EU Enlargement Commissioner Olli Rehn, told Deutsche Presse-Agentur dpa.

However, Nagy would not confirm reports in Friday's Guardian that Iceland could join the EU as soon as 2011, saying: "the first precondition is that they apply."

Rehn, who comes from Finland, was quoted by the British daily as saying that Iceland is "one of the oldest democracies in the world." "Its strategic and economic positions would be an asset to the EU," Rehn said.

Croatia also vying for EU membership

But he also stressed that the EU normally prefers to have more than one applicant join the bloc at any one time, meaning Iceland's entry could be linked to Croatia's.

Croatia, which submitted its application for EU membership in 2003, wants to finalize negotiations by the end of this year. But talks with Brussels have been slowed down by a border dispute with neighboring Slovenia.

Iceland's conservative Independence party, whose government collapsed this week, has traditionally opposed EU membership. But observers in Reykjavik say it has softened its stance in the wake of the global financial crisis, which pushed the nation of 300,000 inhabitants on the brink of economic ruin.

Pro-EU campaigners argue that membership of the bloc, and eventually of the euro area, would provide the island with much needed stability.

The Social Democrats, who are in favour of EU membership, are currently in talks to form an interim government with the Left-Green Movement, which opposes membership and is riding high in opinion polls ahead of a snap general election likely to take place in May.

Fishing ban could pose obstacle

Officials in Brussels note that the biggest stumbling bloc to Iceland's EU membership -- besides the fact that the country has not applied for membership yet -- concerns the fisheries sector.

Other EU member states are likely to insist that Iceland stick to the EU's fishing quotas and the bloc's ban on whale hunting – two issues likely to create resentment among the local population.

Any transitional arrangements on such issues would be "part of the negotiation process," Nagy said.