22.10.2009 · The Government

The Faroes in a globalized world – opportunities and challenges

Lecture held by the Prime Minister, Kaj Leo Johannesen at the University of Iceland 16 of October 2009.

Honourable Rector, Dean, distinguished members of the faculty, students and guests.

It is a pleasure and an honour to be with you this morning.
In itself Háskóli Íslands and its history is a symbol of the importance Icelanders attribute to knowledge, education and literary tradition. Indeed, we Faroese owe the preservation of parts of our own cultural heritage to your great writers and poets.
For this we are greatly thankful.
I have been asked to say a few words about opportunities and challenges for the Faroes in a globalized world. I shall revert to that in a little while.
First let me share with you a more recent part of Faroese history.
Not that long ago we in the Faroes experienced economic circumstances similar to those in Iceland today. In the early nineties, just over 17 years ago, the Faroe Islands suffered a full-blown economic collapse.
This was brought on by reckless and irresponsible actions on the part of industry and the Faroese banking system, inability of the government to act in time and coupled with a sharp decline in fish catches.
We suffered tremendously. Unemployment soared, people were put out of their homes and within few years nearly 15% of our population had emigrated.
For a while we were largely in denial. Our self-image and beliefs in our abilities were shattered. We were forced to rethink our system of government and to redefine our goals as a society.
In the darkness a spirit of solidarity and resourcefulness rose in our people. In the end these virtues helped us to both economic and psychological recovery.
I do not mean to take lightly the grave difficulties Iceland has ahead. I only bring this up because our experience shows that an economic set-back can be overcome and sometime even bring about necessary changes.
Icelanders are renowned for their resolve and I am certain that you will overcome the present difficulties and once again emerge as the beacon of the North Atlantic nations.
Now I would like to give some brief factual information on the Faroes and our system of government, which is quite different from that of Iceland.
The Faroe Islands do not form a state of their own. We have a longstanding historic and constitutional relationship with Denmark and the Home Rule Agreement of 1948 defines the Faroes as “a self-governing territory within the Kingdom of Denmark”.
The Home Rule Agreement further defines the division of power between Danish and Faroese authorities. In 2005 the relations between Copenhagen and Tórshavn were updated and modernised, allowing for an easier transfer of areas of responsibility to Faroese authorities.
Basically, the Faroese Government is responsible for areas that matter for the everyday life of the Faroese people. Five areas are, however, defined as being at the core of the unity of the realm:
1) The Constitution,
2) Citizenship,
3) The Supreme Court,
4) Foreign, security and defence policy, and finally
5) Monetary and currency policy.
Consequently, the overall responsibility for these areas can not in principle be transferred to the Faroese Government.
Despite this the Faroes have tradition for handling certain aspects of foreign policy of their own. A practice which has developed over time and especially after Denmark’s entrance into the European Community, now EU, on 1 January 1973. Initially this practice centred on fisheries policy and fisheries agreements with neighbouring countries.
Recognising this fact the 2005 update increased the ability of Faroes to conclude agreements under international law. In short the system is such that where the Faroese Government has internal autonomy over a subject matter that autonomy is coupled with external ability to enter into international agreements.
Due to the fact that according to Danish constitutional tradition Denmark is a unitary state there follow some limitations with respect to agreements or membership of international organisations that Denmark is party to or member of.
In the field of foreign policy I should like to highlight the following areas of focus for the Faroese government:
1)    Closer cooperation with Europe,
2)    Cooperation on resource management,
3)    Climate Change and reduction of CO2 emissions.
It is my government’s objective to secure closer and better cooperation with continental Europe. In order to achieve this we have until now followed two specific objectives:
Our primary effort has focussed on gaining membership in EFTA, albeit the process has not been as easy as first imagined and Iceland’s potential exit of the EFTA club also seriously questions the wisdom of our preferred plan of action.
Secondly, our relations with EU must also be improved and the level of cooperation expanded.
Geographically, we are a part of Europe and we consider ourselves as Europeans. It is therefore an unacceptable situation that our formal relations with the vast majority of European nations, namely those in the European Union, is based on an old fashioned trade agreement covering little more than trade in goods.
This situation calls for improvement and recently we have established a group of EU experts with a view to come up with specific proposals for a better cooperation with the European Union. Our aim is to expand the cooperation with the EU countries to cover the freedoms of the internal market as well as to take part in a number of European programs in specific areas of common interest, for instance research and education. It could rightfully be argued that this policy is modelled on the European Economic Area Agreement between the EU and EFTA countries.
The group of experts is expected to deliver their report before Christmas, and then the political deliberations will follow.
Personally, I think the Faroes should commence on a more direct route to expanding cooperation with EU, and such a course of action should not preclude full membership of the European Union.
We must naturally know what the Union can offer and the degree of independence that we are willing to give up before we can determine our future level of cooperation. This will depend on negotiations similar to the ones Iceland and EU have started.
While there is a difference in constitutional status, our concerns as small, resource dependent countries, are much the same. We in the Faroes therefore carefully watch the choices you make in Iceland. The results of your negotiations will necessarily influence our deliberations in relation to our future ties with the European Union.
Though our culture and society is very similar to that of the other Nordic countries, the Faroese economy is highly specialized. Fish products accounted for 97 per cent of the 580 million EUR in exports in goods in 2008.
Few other countries share this level of dependency on marine resources. For the Faroes, safeguarding the marine environment of the North Atlantic and ensuring the sustainable use of its valuable resource is more than a responsibility. It is an absolute necessity.
As the Faroes are not a member of EU we are not subject to the common fisheries policy. We have fisheries agreements with the EU as well as a number of other countries such as Iceland, Norway and Russia.
The Faroes are also active in a number of regional resource management organisations, such as the North Atlantic Marine Mammal Commission (NAMMCO), and associated members of the International Maritime Organisation (IMO).
We share our seat with Greenland in the Northwest Atlantic Fisheries Organization (NAFO), the North Atlantic Salmon Conservation Organization (NASCO) and the Northeast Atlantic Fisheries Commission (NEAFC).
Managing and conserving migrating stocks, most notably the important pelagic stocks of the North Atlantic, is a shared responsibility and requires close regional cooperation. During Denmark’s chairmanship of the Nordic Council in 2010, the Faroes will chair the Nordic cooperation in the fields of fisheries. Among numerous other activities the programme will include a high-level seminar, where the complex travelling patterns of the migrating pelagic species will be examined inter alia also with respect to the changing climate.
When it comes to the protection of the marine environment, local concern is a global concern and a global responsibility, but regional initiatives are also essential to effectively address pollution and other threats to the environment.
The Faroes welcome the fact that the North Atlantic region has a broad network of bilateral and multilateral agreements and regional bodies for the conservation and management of marine resources and environments.
Most of us will agree that the challenge of climate change is best met through a binding, multilateral agreement. The objective of the Government of the Faroes is to become part of the post-Kyoto agreement to be adopted in Copenhagen in December this year. Until now we have not been at the forefront of fighting climate change and we are not party to the Kyoto Protocol.
We are fully aware of the fact that our contribution to reducing CO2 emissions on a global scale is going to be modest and may not even be seen in the statistics. It is, however, our ambition to take part in a future global agreement and bear our part of the burden with respect to reducing CO2 emissions. Another reason – not at least – is the economically purpose eliminating the dependency from oil.
Last year the Faroese government published a green paper mapping the potential for CO2 reductions in energy, traffic, and various industrial sectors. Furthermore, the green paper includes an assessment of the possibility of applying more fiscal measures than at present.
The green paper has been considered by all ministries, which have come up with specific proposals on CO2 reductions. In a couple of weeks my government will introduce a Parliamentary Resolution with firm reduction targets. This will be the first time ever that the Faroes adopt measures with the aim of reducing CO2 emissions, and we expect to get the backing of all parties in Parliament.
With respect to the financial crisis the Faroes have suffered mildly so far. The fact that the Faroese parliament earlier this year chose to put in force on the Faroes the bank packages passed by the Danish parliament has undoubtedly contributed to stabilising our financial sector.
We do face an expected decline in GDP and unemployment has now risen from 1.1% in 2008 to around 4%. There has been a decline in the market price of many high-end fish products while at the same time catches for expensive fish species such as cod and haddock have fallen sharply. This has clearly affected our economy, which is characterised by a limited internal market and thus heavily dependent on external trade. The conditions in the farmed fish industry have recently taken a turn for the better.
Fortunately, several of the economic fundamentals in our resource-based industries look healthy and therefore the outlook for the future is not all gloomy. The decline in prices for cod and haddock are likely to bring about a reduction in the catch effort for those species followed by a long-term reestablishment of these fish stocks.
With respect to the public budget, the shrinking of the economy has made clear that we for a period of time have had a structural deficit, which to some extent was hidden by the extraordinarily high revenues during the boom of the past decade. The government is therefore at present preparing legislation with a view to bring about a long-term balance in the public sector budget.
These measures will include introduction of new revenues, limitations on tax deductions as well as reducing growth in public operating costs. Despite this we expect to run a budgetary deficit of approximately 750 million DKK in 2010. Consequently, we will need to introduce even more profound fiscal measures in the course of next year if the long-term objective of balancing the budget is to be met.
Rector, Dean, faculty members, students and guests.
In my short overview of foreign policy issues relevant to the Faroes I did not touch upon security and defence policy.
Let me therefore end with a few words on these important issues, which we in the Faroes, lacking the tradition to deal with them, frequently forget altogether. In a constitutional sense security and defence policy rest with the authorities in Copenhagen. But according to a document labelled the Fámjin Accord from 2005 the Faroese Government must be fully informed of all issues with respect to the defence of Faroese territory.
The Faroes are covered by Denmark’s membership of NATO and Danish military presence in the Faroes over the past 50 years is closely linked to the objectives of the Atlantic Alliance. Since the end of the cold war it has been maintained that there is no military threat against the territory of Western European countries, including the countries of the North Atlantic. Consequently, the American military presence in Iceland has been phased out and the Danish military presence in the Faroes has been scaled down.
The military radar at Sornfelli, once an important link in NATO’s distant early warning system detecting Soviet military flights in the North Atlantic, ceased its operations by the end of 2007 and soon the Danish Naval Command in the Faroes is expected to be significantly reduced. In the future only a small liaison unit will be maintained in the Faroes, although a Danish naval vessel is still expected to patrol Faroese waters.
Perhaps this period of military tranquillity is only a brief intermezzo as the climatic changes in the Artic among other things are likely to entail a growing military focus on the regions of the North Atlantic. Whether this will once again lead to a larger military presence in Iceland and the Faroes remains to be seen. In my view both countries, Iceland directly and the Faroes indirectly, must continuously maintain and develop the relations with our NATO partners that served us well during the Cold War era.
In the field of economics and resource management we can weigh independence against integration. Not so with respect to security where integration is the only alternative.
Thank you.