Twenty years of Icelandic state aid enforcement : economic liberalisation that ended in the acquisition of an entire economy by the state

Abstract

At the occasion of the twentieth anniversary of the enactment of the EEA Agreement, this article reviews the State aid enforcement against Iceland established by its legal regime. The main State aid enforcement events are closely linked with the main events of the political and economic history of Iceland during the same period. In a narrative style, the arti- cle tells a tale of an economic modernisation that went horribly wrong. In the foreground are State aid cases involving several important policy decisions of the Icelandic government during this twenty year period. We shall see that the implementation of the policy programs was fundamentally flawed. We shall also see that the State aid regime of the EEA Agree- ment consistently failed in pursuing aid issues that could to some extent have mitigated these flaws. In an attempt to explain this tendency it is suggested that the principal enforce- ment agency is vulnerable towards political pressures that may at times overwhelm the legal and economic dimensions of specific cases.