It has a governing coalition that is split by differences over the EU, and the Euro. It’s an island, with its own distinct history. And it has a cold, harsh climate. No, not the UK, but Iceland.

 

The country that went so spectacularly bust in 2008 is showing signs of life. In Iceland, the economy is growing, government debts are under control and unemployment is falling.

 

Not that everybody agrees there is a recovery. On the edge of Reykjavik, I watched hundreds of people queuing up in the snow for food hand-outs.

 

“Iceland is not a good place to be disabled, unemployed, elderly, or a single-mother”, the organiser of the soup-kitchen told me.

 

But in the government, the mood is more upbeat. Cabinet ministers are keen to talk about Iceland’s successful return to the international bond markets, and the relatively low cost of insuring its national debt.

 

Compared to some of the countries struggling in the Eurozone, Iceland now seems to be in a relatively good place.

 

So it’s fascinating to discover that there is a very active debate going on in the government about whether Iceland should press ahead with its application to join the EU, and adopt the Euro.

 

The largest party in the governing coalition, the Social Democrats, is pro-EU. Its ministers accept that this is hardly a propitious time to be making the case for closer economic integration with Europe.

 

However, they argue that the Euro will eventually emerge from its current difficulties, and that in the long run, Iceland will be hurt by maintaining its own currency.

 

“We have been finding it difficult to attract foreign direct investment due to the currency arrangements, we have high financing costs due to the small currency, so there are many reasons why Iceland being a part of a bigger economic framework, including  bigger monetary framework makes good sense” Arni Pall Arnason, minister for economic affairs, said.

 

The junior partner in the coalition, the Left Green Movement, draws the opposite conclusion from the 2008 collapse.

 

It believes that Iceland’s interests are best served by less integration and it worries that Iceland’s fishermen and farmers will enjoy less protection in the wider European market.

 

The Finance Minister, Steingrimur Sigfusson, who is a Left Green, argues that Iceland enjoyed an export-led recovery after the collapse precisely because its currency, the Krona, had fallen so steeply in value.

 

Besides, he points out that membership of the Eurozone is not quite the carrot that it used to be.

 

Accession negotiations are under way, and most Icelanders want them to continue. When the talks have concluded, there will be a referendum on EU membership.

 

In the end, it will probably all come down to fish. Despite the boom and bust in the banking industry, it is fishing that is the traditional mainstay of the Icelandic economy, and which still accounts for about 40 per cent of exports.

 

On the whole Icelandic fishing is profitable, and well-run, whereas the EU’s Common Fisheries Policy is a disaster. There are too many European ships chasing fast-diminishing fish stocks, and too little political will to solve this problem.

 

Never mind the current crisis in the Eurozone Icelanders won’t want to commit themselves to the EU until they have a clear understanding of how it will affect their fishing fleet.