* Iceland could leapfrog existing applicants
* Diplomats see risk of slower reforms
* Iceland must still overcome fisheries, banking hurdles
By David Brunnstrom
BRUSSELS, July 17 (Reuters) - Iceland could jump the queue ahead of countries from southern Europe and become the next to join the European Union, slowing reforms and fuelling discontent with the accession process in other applicant states.
Iceland’s parliament on Thursday narrowly backed the government’s plan to begin talks to join the 27-nation bloc, months after a meltdown of the north Atlantic island’s economy. [ID:nLF682068]
Iceland is well placed for quick accession because of its long democratic tradition and membership of the European Free Trade Association and European Economic Area trading groups, meaning it is already in line with most conditions for joining.
If voters agree to seek membership in a referendum and talks go well, political analysts say Iceland could join by July 2011 — before Croatia, which had been expected to be the next member despite a border row with Slovenia that has stalled its drive.
"There is the possibility Iceland could leapfrog Croatia," an EU diplomat said. "It does put a spotlight onto the problem that none of the Western Balkan states are moving very fast."
Countries that wish to join the EU must meet criteria and standards set by the Union, and many face long talks on economic and political reforms. [ID:nLE481929]
Elsewhere in the Balkans, Serbia’s membership bid has been blocked by the Netherlands over Belgrade’s failure to cooperate fully on investigations into Yugoslav war crimes and Macedonia’s bid has been blocked by a row with Greece over its name.
Bosnia’s bid is held up by internal bickering and diplomats say Germany has held up consideration of Albania’s application.
Turkey began membership talks in 2005, but its drive has been stalled by a row over the divided island of Cyprus and opposition from countries such as France to the large and predominantly Muslim state joining the Union. [ID:nLE380846]
The EU has long seen integration of the Western Balkans into the bloc as a means of ensuring stability in a region where wars were fought in the 1990s and many would see Turkey’s accession as a way to improve ties with the Muslim world.
RISK OF DISILLUSIONMENT, NOT CONFLICT
Diplomats said that although few experts expected a return to combat in the former Yugoslavia, there was a risk that disillusionment with the EU would increase in countries that saw no visible progress in their accession bids.
"We may be in a scenario in which reform stagnates and a soft nationalism returns in some countries — arguably it already has in Bosnia and Macedonia — and there is not the improvement in governance we would like to see coming through the EU accession process," the EU diplomat said.
Another EU diplomat said it was important for EU states to take into account the sensitivities of countries with existing EU bids when dealing with Iceland’s.
"We must be careful not to isolate or annoy those countries with pending applications. This cannot be seen as a two-tier system for richer and poorer countries. We must insist on a level playing field," he said. A third diplomat said it remained unclear whether Iceland’s bid would be discussed at the next meeting of EU foreign ministers on July 27 but it would be important to bear in mind the sensitivities of other membership applicants.
CAUTION OVER OTHER APPLICANTS’ STATUS
Welcoming Thursday’s decision by Iceland’s parliament, EU Enlargement Commissioner Olli Rehn also underlined the bloc’s "continued commitment to South East Europe". [ID:nLF294008]
Despite Iceland’s advantages, its path to Brussels may not be entirely smooth because of differences over fisheries and disputes with some EU states over accounts in failed Icelandic banks.
"We’re slightly looking into the dark because we don’t know how difficult negotiations will be with Iceland on issues such as fish," the first EU diplomat said.
"If the Icelanders adopt a position that they want a permanent derogation from the Common Fisheries Policy for example, they’ll probably get stuck quite quickly," he said.
It is also uncertain whether the people of Iceland will back the move in a referendum. [ID:nSAT006364]
A Croatian diplomat remained calm about Iceland, recalling earlier comments by Rehn that in the event of an Icelandic bid, Croatia and Iceland would probably join the EU at the same time. [ID:nL6120207]
He said the other bidding states knew Iceland was already closer aligned with EU standards, so it was natural it would move more quickly.
"But there is no concern," he said. "It isn’t likely they will be ready before Croatia. At most they will be at the same time." (Additional reporting by Darren Ennis; Editing by Timothy Heritage)