STOCKHOLM — Iceland formally applied Thursday to join the European Union but said it would not accept a "rotten deal" for its fishing industry, a key sector of the island nation's troubled economy.
Iceland's parliament voted last week to seek EU membership as a way to stabilize the country's economy, which was one of the first causalities of the global recession after years of strong growth.
The small North Atlantic country of 320,000 residents already meets most of the EU membership criteria, but tough negotiations await over fishing rights.
The independent-minded Icelanders are concerned that the 27-nation bloc's common fisheries policy would give other European fleets access to Iceland's rich waters.
"To be frank with you, if we would get a rotten deal on the fisheries, the Icelandic people would get quite angry," Foreign Minister Ossur Skarphedinsson said after presenting the EU application to his Swedish counterpart, Carl Bildt. Sweden currently holds the EU presidency.
"This is not only an issue of economics. It is also an emotional issue. It is also an issue that is related to sovereignty," said Skarphedinsson, a former fisherman.
He said he was confident the two sides would find a solution that would meet both EU rules and "our special needs as a nation."
In 2007, fishing employed 4 percent of Iceland's work force, just over 7,000 people. But seafood accounted for almost half of Iceland's exports and 10 percent of its gross domestic product.
The EU has to approve the accession, after which Iceland would have to hold a referendum on membership. Skarphedinsson said he hoped Iceland would become an EU member within three years.
Bildt declined to give a timeline for membership negotiations but noted that several EU members don't want to deal any expansion issues before a crucial Irish vote on the bloc's reform treaty, expected in October.
EU Enlargement Commissioner Olli Rehn welcomed Iceland's application, citing its "long and deep democratic roots."
The fishing issue is not Iceland's only hurdle, however. The Icelandic Parliament, which only narrowly approved the EU application, has yet to approve an international agreement to repay Dutch and British depositors who put money in the offshore division of failed Icelandic bank Landsbanki. If the assembly says 'no' to the deal it will complicate Iceland's membership talks with the EU.
Before Iceland's economic meltdown, financial deregulation, a stock market boom and a surging currency helped Icelandic entrepreneurs go on a global buying spree, snapping up businesses from Britain's Hamleys toy store to the Karen Millen clothing chain. Iceland's banks drew depositors from around the world with too-good-to-be-true savings rates.
The over-stretched banks collapsed in 2008 under the weight of debt amassed during the years of light regulation and retailers went bankrupt. The country's currency, the krona, has plummeted, while unemployment and inflation have spiraled.
Iceland is already part of the European Economic Area, a trading block that gives Icelanders the right to live and work in the EU while allowing the country to run its own agricultural, fishing and monetary policies.
Associated Press Writer Malin Rising contributed to this report.