Iceland, a NATO member which already enjoys access to the EU’s single market through ​the European Economic Area, will vote on August 29 on whether to reopen negotiations

International News via Reuters:

European Union officials are hoping a referendum in Iceland on whether to restart membership talks will help boost support within Europe for other less wealthy states to join the bloc, diplomats told Reuters ahead of a public ‌vote this month.

Iceland, a NATO member which already enjoys access to the EU’s single market through ​the European Economic Area, will vote on August 29 on whether to reopen negotiations.

The referendum comes as Europe faces major decisions on enlargement, with Montenegro hoping to join the EU in 2028 and aspiring members Albania, Ukraine and Moldova pushing to make progress on their bids.

Iceland’s referendum is not a vote on membership itself and any deal would require a second referendum. Supporters say membership could help the island address its high living costs, stand up to larger trade partners and withstand shifting geopolitics in the Arctic, such as U.S. President Donald Trump’s designs on Greenland.

A yes vote is not guaranteed. A Gallup poll this month found voters split on restarting talks: 46% said they would vote yes and 46% no, with 8% undecided. Polls show a majority against actually joining the bloc.

BOOST FOR ‘ATTRACTIVENESS OF THE EU’, DIPLOMAT SAYS 

But EU diplomats say that restarting talks with a wealthy country that would be easy to integrate – albeit one with a population of just 400,000 people – could help improve the optics of enlargement among those European citizens who are wary about welcoming new members.

A positive vote in Iceland “would show the attractiveness of the EU in general and thus boost morale in the EU”, said a senior EU diplomat, adding that it “would make it easier for sceptical countries to swallow the accession of Montenegro” — also a country with a small population but with a much lower GDP per capita.

If Iceland joined the bloc, it would have “a positive impact on enlargement as a political tool”, a second EU diplomat said. “There is hesitation on the Western Balkans, Moldova and Ukraine, with Iceland I only see positive aspects … it has a modern economy, it’s dynamic and small,” they said. 

A tandem of the two countries – Iceland and Montenegro – could help overcome potential hurdles in EU members where some voters fear the possible impact of EU enlargement on their economies, officials say. 

“Tying up Iceland with Montenegro, that would probably be more successful – (that) is the perception, at least at this point – than moving Montenegro alone,” said Steven Blockmans, deputy director of the Tallinn-based International Centre for Defence and Security.

A 2025 Eurobarometer poll found 56% of EU citizens are in favour of further EU enlargement, but support varies in different countries across the bloc.

CHANGING GEOPOLITICS

Reykjavik abandoned previous negotiations in 2013 when ​a Eurosceptic government took power, but Russia’s war in Ukraine and Trump’s statements about Greenland have put a spotlight on Iceland’s geostrategic position.

“The erosion of international law and the rules-based international system is a concern for us. Security and defence-related issues also — nobody was talking about that back in 2009 or 2013,” a source familiar with Iceland’s position said.

EU officials have sought to stay out of Iceland’s internal debate. But if Icelanders vote in favour of restarting talks, officials expect the country to make quick progress.    

“It speaks to the growing attractiveness of the EU in a world that is rapidly changing,” EU Enlargement Commissioner Marta Kos told Reuters when asked about the significance of Iceland’s referendum.

“We see that practically all European countries seek accession or closer association to the EU. And it would undoubtedly add to growing momentum for the EU to accept new members.”

FISHERIES WOULD BE TOUGHEST POINT OF NEGOTIATION 

If the “yes” vote wins, Kos said she would expect accession negotiations to take one to two years, with the timing of membership dependent on a second referendum in Iceland and ratification by the EU’s 27 members.

Officials say fisheries – one of the pillars of Iceland’s economy and national identity – is set to be the toughest point of negotiation if talks did restart. 

“The EU has to ask itself, does it want to make fisheries the point that the potential accession of Iceland would break on – which has very limited value in the GDP of the EU, compared to the geopolitical importance of having a country like Iceland join?” said the source familiar with Iceland’s position.

Brussels has signalled openness to compromise, with Kos saying: “Iceland’s unique specificities on fisheries and agriculture are well known.”

“I’m confident that, together with EU member states, we would find creative solutions that respect the sensitivities of both Iceland and our member states,” she said. 

Reporting by Lili Bayer in Brussels and Stine Jacobsen in Copenhagen; Editing by Alison Williams

This year’s wildfires in southwestern Europe and the severe flooding that hit Spain in 2024 and Germany and its neighbours in 2021 show how climate damage is adding to a list of strains on Europe’s finances

International News via Reuters:

Someone will have to pick up the tab for the damage wrought by Europe’s increasingly volatile weather, and with the bulk of those economic losses uninsured, that will be the public purse unless immediate action is taken.

This year’s wildfires in southwestern Europe and the severe flooding that hit Spain in 2024 and Germany and its neighbours in 2021 show how climate damage is adding to a list of strains on Europe’s finances that already includes higher defence spending and rising costs associated with an ageing population.

“The problem is that they’re becoming more recurrent,” Federico Barriga-Salazar, head of Western Europe sovereign ratings at Fitch, said of catastrophes until now largely viewed as costly budget one-offs rather than as a regular expense.

“If a government is already fiscally tight, it means that it does create some policy trade-offs,” he said of the pressure that such economic losses put on other spending items.

If the current scale of the fiscal hit is arguably quite small, there is a growing acceptance it will only get bigger in a region which is the world’s fastest-warming continent.

Weather- and climate-related extremes caused economic losses of an estimated €822 billion ($953 billion) in the European Union between 1980 and 2024, according to the European Environment Agency — with a quarter of that damage inflicted in just the last four years.

Public deficits across the euro zone already average around 3% of GDP. Barriga-Salazar cited estimates that the Spanish 2024 floods — Europe’s worst flooding event in five decades — imply reconstruction costs of 0.7 percentage points of output from 2024 to 2026.

Moreover, only a quarter of climate-linked catastrophe losses are insured in the EU, with coverage in some countries below 5%, the EU estimates. Some fear that level of insurance coverage will only get smaller as a proportion of overall costs as extreme weather events occur more regularly.

“I do think this just means the more you have these risks, the less they will be insured,” said David Zahn, head of European fixed income at Franklin Templeton. “This is a big issue, and it will impact some of the countries by 1% to 2% of GDP.”

Economic think tank Bruegel calculated that, while most of the 2021 flood damage was covered by insurance in Belgium, the low level of insurance coverage in Germany meant it had to draw on public funds of €30 billion for the bulk of damages.

ADAPTING AND SHARING RISKS

With the European Union due to release proposals for climate resilience and risk management this autumn, attention is focused on possible solutions.

Greece, whose tourism-dependent economy is notably exposed to the risk of heatwaves and wildfires, is looking at ways to boost insurance coverage while making water and energy infrastructure more robust in tourist hotspots.

Following huge floods in early 2026, Portugal has announced plans to introduce mandatory home insurance backed by a natural disaster and earthquake disaster fund and a solidarity mechanism to guarantee universal access.

A possible stopgap measure for some could be recourse to so-called catastrophe bonds under which investors can receive handsome returns but also lose part or all of their principal if a predefined event, such as a hurricane or earthquake, occurs.

Franklin Templeton’s Zahn noted that for the sovereign, this could amount to an expensive gamble: “If the event happens, it pays off immediately. But you could also have five years with nothing, and you just paid out 8% per year.”

Heather Grabbe, senior fellow at Bruegel, said governments needed to put in place arrangements more systematic than one-off emergency spending, which risks creating the perverse incentive for households and businesses not to take out insurance.

“All governments across Europe need to assess their exposure and make comprehensive plans to reduce future damage through adaptation investments, as well as pooling risks across borders,” Grabbe said.

Numerous studies highlight how early investments in making economies more resilient to climate change can over time save money – and avoid what a 2025 Oxford University study called an “adaptation investment trap”, where repeated climate disasters raise debt and so leave less money for protection measures.

Spanish Prime Minister Pedro Sanchez has argued that green investments worth 0.1% of GDP could prevent economic losses totalling eight times that, and avoid tax revenue losses amounting to three times the original investment.

The ECB has proposed a joint EU public-private reinsurance scheme pooling private risks from natural catastrophes, backed up by an EU fund for public disaster financing.

But the question is whether this summer’s heatwaves will generate the political will to take on some of the upfront costs of such action — both at government and EU level.

A European Commission spokesperson said the EU executive was looking into ways to address the climate insurance protection gap as part of a package of measures due to be adopted by the end of the year.

($1 = 0.8624 euros)

Additional reporting by Kate Abnett in Brussels, Aislinn Laing in Madrid, Andrei Khalip in Lisbon, Johann M Cherian in Bengaluru, Francesco Canepa in Frankfurt; Writing by Mark John; Editing by Hugh Lawson

De La Espriella said the impact included roughly 24.5 trillion pesos in buildings and 5.5 trillion pesos in infrastructure

International News via Reuters:

The economic losses from a powerful earthquake that struck Colombia last week are expected to reach 30 trillion pesos ($9.58 billion), Colombia’s President Abelardo De La Espriella said on Monday.

De La Espriella said the impact included roughly 24.5 trillion pesos in buildings and 5.5 trillion pesos in infrastructure.

“Just imagine the scale of the disaster,” De La Espriella said, noting that the figures were likely to change. “This is a preliminary figure that will be adjusted as we obtain more information and as the damage caused by this earthquake is assessed in each of the regions.”

The 7.4-magnitude quake toppled buildings in various parts of western Colombia, including the major cities of Cali and Pereira, killing 280 people, injuring more than 4,000, and leaving another 143 people missing. 

By comparison, the earthquakes that struck neighboring Venezuela on June 24 caused damage to housing and infrastructure estimated at $37 billion, according to an initial assessment by the United Nations Office for Disaster Risk Reduction published last month.

The Colombia quake is the first major crisis facing De La Espriella, who took office just days before and now must oversee relief and reconstruction efforts.

($1 = 3,131.6400 Colombian pesos)

Reporting by Luis Jaime Acosta and Nelson Bocanegra, Writing by Natalia Siniawski, Editing by Daina Beth Solomon