The European Parliament adopted on July 2010 a resolution welcoming the prospect of Iceland becoming an EU member state.

Controversy of repayments to the United Kingdom and Dutch governments following the collapse of Icelandic banks should be resolved 'bilaterally', the resolution said.

Iceland was also asked to cease all whaling.

MEPs endorsed the decision by EU leaders on June 17 to open membership talks with Iceland, which submitted its application in July 2009.

At the same time, the European Parliament asked Iceland to cease all whaling which is in contradiction with EU laws, a European Parliament media statement said.

The reservations the country has lodged with the International Whaling Commission should also be dropped, said the resolution, which was adopted by show of hands.

Iceland's accession would allow the EU to play a more active role in the Arctic Region, said the resolution drafted by Cristian Dan Preda (EPP, RO), which underlines the country's "strong democratic culture".

Iceland is already part of the Schengen zone and a member of Nato and has had a free-trade agreement with the EU since 1973.

On the Icesave bank issue, MEPs said that Iceland was obliged to ensure payment of the minimum compensation to Icesave depositors in the UK and the Netherlands, as the EFTA Surveillance Authority said in its letter of formal notice of May 26. In a referendum on March 6, Iceland's voters vetoed a repayment plan following the collapse of Icesave.

MEPs said that although, as a member of the European Economic Area, Iceland complies with most EU laws (notably single market legislation), it still needed to reform substantially the organisation and functioning of its financial supervisory system - "the key institutional weaknesses of the country's economy" - and the way judges, prosecutors and supreme judicial authorities are appointed.

The policy areas that will have to be fully negotiated with Iceland are agriculture, fisheries, taxation, economic and monetary policy and external relations.

Public support in Iceland for EU membership has declined since summer 2009, according to  the resolution. MEPs are asking the Icelandic authorities to initiate a public debate to address the concerns of Icelandic citizens regarding EU membership.

MEPs expect that the new EP-Iceland Joint Parliamentary Committee between the EP and the Althingi (Icelandic Parliament) will enhance an existing "fruitful collaboration" between the two sides, the European Parliament statement said.