Iceland's Skyrocketing Prices Spark Calls for EU Membership

Iceland, a country in the middle of the Atlantic Ocean, has been ranked as the most expensive nation on earth since last spring. According to the Icelandic trade union Víska's calculations, it costs almost €7 ($8.15) for six small tomatoes and over €22 for a plain pepperoni pizza in Reykjavik. The cost of living in Iceland is rising at an alarming rate, with prices increasing by 5% year-on-year so far this year, double the central bank's target of 2.5%. Many Icelanders believe that joining the European Union would help calm the inflationary fever that is affecting their country.

Thorvaldur Gylfason, an emeritus professor at the University of Iceland, points out that the high cost of living in Iceland is mainly due to a lack of competition and high transport costs for most products. The country imports half of what it consumes, mostly from continental Europe. Economist Jon Steinsson, a professor at the University of California, Berkeley, disagrees with those who believe joining the EU would help reduce prices. He argues that trade barriers would be reduced, allowing interest rates to be lowered and making life cheaper.

Despite the high cost of living, many Icelanders are optimistic about their country's future in the EU. On August 29, a key referendum will be held where voters will decide whether to take a giant step toward becoming the EU's 28th member state. If the majority votes in favor, it is expected that the euro would be adopted in a second step after accession.