I love this diagram: https://www.reddit.com/r/europe/comments/1tda6wl/european_in...

There are so many treaties besides EU.

They don't need to join the EU to use the euro. There are countries that use the U.S. dollar even though they're not the U.S. Sometimes it's just de facto use the dollar. There is technically a local currency and people use it when forced to but they would prefer the dollar. If you're a small country, something like the dollar or the euro is probably your best bet because of the stability it affords. The advantage to joining the EU is Iceland gets a little bit of input on how the euro was run versus if you use the dollar of the euro when you're not a member of their respective country you are partially tying your financial stability to something that you have no input or control over.

If the króna fluctuates so much, wouldn't that also indicate that demand for the króna just fluctuates a lot? Presumably, in absence of major conflicts between Iceland and its trading partners, as a result of economic imbalances. Those won't go away if Iceland were to join the eurozone, either as a EU member or via the Kosovo/Montenegro route. It might deprive the Icelandic central bank of a valuable tool to stabilize their economy, by weakening or strengthening their currency as economic circumstances demand. This was a big problem for the southern EU economies back in credit crisis times.

Now there are of course many other considerations that might offset this downside to joining the eurozone. I would personally welcome our Icelandic friends joining the EU (if they chose to), but it's good for them to have a public debate about both the up- and downsides first.

Not sure how it would affect home mortgages but the majority of icelanders are on mortgage plans that the principal remaining rises with inflation(I forget the name, I left a few years ago) - and will never likely pay them off.

As I understand it, Kosovo and Montenegro adopted the Euro unilaterally, without agreement from the EU. I don't think that'd be (politically) possible for Iceland (?). So the EU would need to agree to this, which also doesn't seem politically possible (?)

Not sure for a small country like Iceland if it make sense to use Euro over having control over their currency. Things could get super expensive overnight and it would work when things are smooth, but in current political climate you never know when the next financial crisis going to happen and don’t think they want Brussels to dictate their monetary policy

Kosovo and Montenegro adooted the Euro unilaterally, but various micro countries use the Euro through special treaties (Monaco, San Marino, Vatican etc). Iceland is 10x larger but this in principle possible.

During the 2010 debt crisis there was much talk of profligate Greece being "thrown out" of the euro zone. In this dark scenario Greek civil servants would get their pay rises in worthless drachma, but Greek homeowners would be left with unpayable euro mortgages. But nobody ever talked about the Montenegro option (similar to Ecuador and USD). I never understood this. What was stopping Greece from defaulting and keeping the euro anyway?

Yes their currency suffered a lot in 2008, they would have been protected if they were using the Euro at the time

But then what currency would they use in eve online? How could we replace all of the iskies memes

Can they become part of the eurozone without joining the european union?

You can just voluntarily adopt euro. Montenegro isn’t officially in the eurozone. They just unilaterally adopted it.

Joining the Euro is not the panacea that everyone thinks it is.

It comes with some major drawbacks: - no control of interest rates since these apply to everyone in the Eurozone regardless of the current economic situation of a particular country. - no more devaluation to get back some competitiveness on international markets - strict financial guidelines in theory (3% deficit max per year and 60% of GDP/debt ratio)

Finally, the biggest problem as it's been highlighted by many economists is that it spreads the risk to the whole Eurozone which sounds great in theory until you find yourself drowning in debt like Greece was in the 2010s or like France is nowadays.

Because now your government is borrowing in Euros, the markets move very slowly and the full impact of the finances of any Euro government is completely subdued since in the pool of countries that use the Euro there is Germany which is very good and very trustworthy creditor.

Take a look a what happened with Liz Truss in the UK, she made some rather stupid announcements and the markets reacted as they should and that lead to her removal and to a change of plans.

In France by contrast, no such changes have happened despite the fact that the French economy has been going downhill for awhile due to their 5%++ yearly deficits and their 120% debt ratio.

If France still had the Franc, then the markets would have forced the politicians in charge to either course correct and/or eventually to pass on multiple painful but necessary reforms.

Instead what we have is complete political paralysis and many presidential candidates are openly calling for a roll back of more pension reforms, lowering the retirement age to 60, increasing the pay of all the civil servants by 20% and more complete out of control spending.

The supposed EU fiscal rules have never been enforced anyway which means that countries don't really have any incentives to curb their spending since the ECB is always backing them.

> One solution for Iceland would be to join the eurozone without becoming a member of the EU, as Kosovo and Montenegro have done.

This only makes sense if the primary concern is native (Icelandic) politicians being unable to responsibly manage their currency. Otherwise, there's no advantage over just maintaining a stable exchange rate with the euro.