By David Brunnstrom
BRUSSELS (Reuters) - The European Commission held out the prospect of early EU membership to Iceland on Friday if it applies for entry following its economic collapse.
EU Enlargement Commissioner Olli Rehn told the Guardian newspaper if Iceland made an application soon, it could join at the same time as Croatia, which hopes to conclude accession talks with the bloc later this year and join in 2011.
Iceland has long been cautious about entering the EU, but support for the idea has risen after its economy collapsed last year under the weight of billions of dollars of foreign debts, racked up by its ambitious -- but now bankrupt -- banks.
"The EU prefers two countries joining at the same time rather than individually," Rehn said. "If Iceland applies shortly and the negotiations are rapid, Croatia and Iceland could join the EU in parallel."
Rehn's spokeswoman Krisztina Nagy said Iceland would not get special treatment and would be treated on its own merits.
"But because it is a member of the European Economic Area, its negotiations would go relatively fast," she said referring to a zone that includes the EU's 27 states plus Iceland, Liechstenstein and Norway.
A spokesman for the EU presidency, currently held by the Czech Republic, said: "Iceland is a country with which we share values." He said its legislation was already to an extent aligned with the European Union's body of law.
EU diplomats said an application by Iceland would most probably be viewed favourably by EU states, which would need to approve its membership, despite concerns about the pace and extent of enlargement in many.
"My assumption would be is that it would be less trouble than some of the others," said one diplomat, referring to the troubled accession paths of mainly Muslim Turkey and, to a lesser extent, the countries of the Western Balkans.
However, France and Germany have said that before enlarging further, the EU must first revive its stalled Lisbon treaty, meant to prepare the bloc's institutions for more members.
"Iceland would be a good candidate if you look at the very close cooperation we have already nowadays and the very close coordination of the legal instruments," said another diplomat.
"But on the other hand quite a few member states have said without Lisbon there should be no enlargement."
A tough issue would be access to Iceland's rich fishing waters, crucial to the island's economy. The country has traditionally been reluctant to share them.
The woman expected to become the Iceland's new prime minister, Johanna Sigurdardottir, is from the Social Democratic Party, which favours EU entry.
It is now negotiating on a new government with the Left-Greens, which are cautious, though have said they could back a referendum on starting talks.
(Reporting by Matt Scuffham in London and Mark John in Brussels; editing by Elizabeth Piper)
