The European Union today agreed to start accession talks with Iceland and urged it to resolve a debt dispute with Britain and the Netherlands.
As a member of an EU borderless travel zone and economic cooperation area, Iceland already meets many EU rules and hopes to join it in about two years.
It faces possible opposition from some EU countries because of a row over debts stemming from Iceland's banking collapse.
Belgium will play a leading role in the talks this year as it holds the EU's six-month rotating presidency that expires in December. Due to start tomorrow, the talks will cover more than 30 policy areas.
Iceland has yet to work out how to repay debts linked to the collapse of Icesave, an Icelandic bank that failed in 2008. The British and Dutch governments want Reykjavik to return billions of euros they paid to depositors whose funds were frozen in the failed scheme.
But Icelanders rejected a payout plan in a referendum and talks on repayment have so far failed. The issue has turned many Icelanders away from the EU.
An opinion poll carried out in June showed almost 60% of Icelanders in favour of the government withdrawing the country's application, while only about a quarter of those polled opposed such a move.
Other contentious issues include the EU policy of fishing and whaling. To join the EU, Iceland will have to allow foreign investment in its lucrative fishing areas and may have to abandon its long tradition of hunting whales.
