Iceland and Europe
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🌾Land & Agriculture

Would food become cheaper?

Yes, and significantly. Lower tariffs would bring prices down right away, and once the euro arrives, real competition would be far more likely to break up the oligopolies that dominate our food market. A typical family could save tens of thousands of krónur per month.

We have some of the highest food prices in Europe. That's not an accident — it's the result of deliberate tariff protection and an oligopolistic market structure.

Why is food so expensive?

Two factors work together. First, high tariffs protect domestic agriculture — particularly dairy and lamb production — from competition with European producers who operate at far lower cost. A litre of milk or a kilo of cheese costs far more here than in neighbouring countries.

Second, the Icelandic food market is controlled by a handful of companies. A few wholesalers and a few retail chains dominate the entire chain from import to the shelf. This oligopoly means that even when input costs fall, the savings don't necessarily reach consumers. There is simply too little competition to drive prices down.

What would change?

EU membership would eliminate tariffs on imported food over a transition period. European dairy products, meat, fruit, vegetables, and processed foods would enter at internal market prices. This alone would lower consumer prices substantially.

But what about competition? As long as the króna is our currency, exchange rate risk is a significant barrier for foreign companies considering entry into the Icelandic market. The market's small size and the króna's volatility make operations riskier and harder to plan. That's why European discount chains like Lidl and Aldi have shown little interest in Iceland so far.

This changes once the euro enters the picture. With a shared currency, the exchange rate barrier disappears and Iceland becomes simply part of the European market area. It then becomes far more likely that foreign chains would step in with real competition against the few players who currently control our food market.

What does this mean for households?

Based on price comparisons with the EU member states most similar to ours, consumer food prices could fall by 20–30% on many staple items. For a family of four, that's a meaningful boost to household finances — potentially tens of thousands of krónur per month. This is one of the most tangible and obvious benefits of membership, from the perspective of ordinary families and consumers.

What about farmers?

But the benefits come with trade-offs. Our agriculture, particularly dairy farms and sheep farming, is built on protected markets, subsidies, and direct government support. These aren't just industries — they sustain communities across rural Iceland. The accession negotiation would need to address this: what level of CAP direct payments would our farmers receive, how long a transition period before full market opening, and what rural development support would be available.

Other EU countries have navigated this. Finland and Sweden, which joined in 1995, had similarly protected agricultural sectors and negotiated transition arrangements. Food prices fell for consumers while farming continued. It changed, certainly, and consolidation took place, but it continued. We could learn from the experience of these neighbouring countries.

In short: The removal of tariffs and import quotas would bring food prices down quickly. The gains become even greater when the euro removes the currency barrier and opens our market to real competition — after decades of oligopoly. The challenge is to manage the transition so that rural communities not only survive but thrive in a new environment.

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