Iceland has officially withdrawn its bid to join the European Union, fulfilling a promise made when the current Icelandic government came to power in 2013.

“Iceland’s interests are better served outside the European Union,” Gunnar Bragi Sveinsson, the Icelandic foreign minister, said in a letter to the European Commission and the Latvian presidency of the Council of the EU.

Iceland, along with Norway, is part of the European Economic Area (EEA), which gives it access to the EU single market. In return, Iceland must follow most areas of EU law, but it does not get a vote in deciding those laws because it is not an EU member.

Iceland applied for EU membership in 2009 as it reeled from an economic and currency crisis that saw the Icelandic krona lose almost half its value as a result of a banking collapse. Icelanders turfed their centre-right government out of power that year and elected centre-left prime minister Jóhanna Sigurðardóttir, who campaigned on a pledge to bring Iceland into the eurozone. It was hoped that the euro would bring more stability and protect Iceland from such shock in the future. In order to use the euro, Iceland would have to join the EU. EU leaders approved Iceland’s candidacy in June 2010.

However, public opinion turned against the idea of joining the EU after Iceland entered an economic recovery – particularly as the euro began to experience its own crisis. In 2013 Iceland elected a coalition government of the Progress Party and the right-wing Independence Party, which campaigned on a pledge to halt Iceland’s EU bid. The new government suspended the talks when they came to power, but did not officially cancel the bid until yesterday (12 March). The centre-left opposition has criticised the government for taking the decision without approval from the Icelandic parliament.

A Commission spokeswoman said it has received and acknowledged the letter. “It’s of course the prerogative of the country of Iceland to take a free and sovereign decision on how to pursue its relationship with the European Union, and we of course fully respect such a decision,” she said. “In any case Iceland remains an important partner for the European Union, notably through the participation in the European Economic Area agreement the membership of the Schengen area as well as co-operation in Arctic matters. And the doors to the EU of course remain open.”

She said the accession will technically remain open for the next two years, so if a new government decided it wanted to re-start negotiations, it would not have to start all over.

The Common Fisheries Policy (CFP) remains the thorniest issue preventing Iceland’s accession. The EU currently manages North Sea fishing stocks through bilateral agreements with Iceland, but these agreements have frequently been violated or broken off. Fishing is a large part of Iceland’s economy and there are fears that EU limits, designed to maintain fish stocks, would hurt the industry.

Although it has been long-expected, the loss of Iceland as a candidate country leaves no prospect for any country joining the EU in the next five years. The remaining active candidates are Serbia, Montenegro, Macedonia, Albania and Turkey. However these countries are a long way from fulfilling the criteria for EU membership. By contrast, EU accession for Iceland and Norway would be simpler because they already follow most EU law as part of the EEA.