Iceland votes against joining EU in referendum

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In the narrow poll on Saturday 52.8 per cent of ballots cast were against the government's proposal to reopen negotiations with Brussels, while 47.2 per cent were in favour.

The vote had a turnout of 82.5 per cent.

Prime Minister Kristrun Frostadottir said Iceland would focus on strengthening its existing ties with the European Union through the European Economic Area agreement, which it shares with Norway and Liechtenstein.

"A big lesson for me and also for the government is that people are happy with the EEA agreement," she said.

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Out of six constituencies, only the two in central Reykjavik had a majority that voted in favour, while the rural areas and the Reykjavik suburbs voted against.

The government had framed membership as a shield against trade wars and Arctic rivalry and presented the referendum as a "now or never" moment. Frostadottir said the "no" would end the debate for as long as her centre-left coalition was in power.

A European Commission spokesperson said it respected the choice of the Icelandic people and noted that Iceland remained a close partner of the European Union.

In Brussels, some officials had voiced hopes a vote to join from Iceland could ease scepticism toward EU enlargement and strategically strengthen the bloc when Arctic security is in focus.

One EU diplomat described the result as "a clear setback for Brussels," adding that the issues of fishing and independence had been decisive.

The fishing industry is one of Iceland's biggest, making up 15% of gross domestic product in direct and indirect contributions, and some 40% of export revenue, data shows.

Iceland, a NATO member state but with no standing army of its own, also debated whether EU accession could boost the country's security when US President Donald Trump has cast doubt on the U.S. commitment to the military alliance.

Trump has also repeatedly said he wants to acquire Greenland, another Arctic island.

But for some Icelanders, fishing was a sharper focus than security.

The island nation first applied to join the EU in 2009 when a financial crisis hit the country's small, exposed economy. A Eurosceptic government ended talks in 2013.

Ahead of Saturday's referendum, finances were again a central issue as Iceland has grappled with high inflation and interest rates.

Supporters of a "yes" vote had said EU membership, and possibly adopting the euro, could bring relief. Iceland's central bank interest rate is 8%, compared with 2.25% at the European Central Bank.

Opposition leader Gudrun Hafsteinsdottir, who led the "no" campaign, said the economic case is overstated. "These are not problems that Brussels will solve for us. These are problems that Icelandic politicians must solve," she said.

Under EU rules, fishing quotas are based on historical fishing patterns, among other factors. Some Icelandic officials have said Iceland would therefore retain control of its waters, since no EU country has fished there for decades.

Hafsteinsdottir disputed that. "I know that the European Union will come up with some promises of some flexibility, especially in the beginning, but we know that it will not be for good," she said.