Once the commission's report has been completed, membership negotiations can start.

But it is the voters who will have the last word on whether the Icelandic government can join the 27-nation bloc.

If Iceland is successful in its negotiations with the European Union, the question will then be put to the Icelandic people in a referendum.

Iceland's Prime Minister and Social Democrat leader Johanna Sigurdardottir was a strong advocate of closer ties with the EU and adopting the euro on the election campaign trial earlier this year.

The government argues joining the European Union would be beneficial for Iceland, claiming it would stabilise the economy following the collapse of its once-booming financial sector in October.