REYKJAVIK (AFP) - Iceland on Thursday announced it was dropping its bid to join the European Union in line with pledges made two years ago by its then new eurosceptic government.

Iceland first applied for EU membership in 2009 but Foreign Minister Gunnar Bragi Sveinsson said in a statement that the centre-right government had informed current EU president Latvia and the European Commission of its decision to annul the application.

"Iceland's interests are better served outside the European Union," the minister wrote on his website.

Iceland first applied for EU membership under a leftist government in 2009, when the country was badly shaken by a damaging economic crisis that saw the Icelandic krona lose almost half its value, making euro zone membership an attractive prospect.

But the thorny issue of fishing quotas was seen as a key obstacle to joining the bloc, although the issue was never brought up in the accession talks. Fishing represents an important part of the Icelandic economy.

Opinion polls also began to show growing resistance among Icelanders to EU membership.

When the centrist Progress Party and the right-wing Independence Party came to power in 2013 they suspended the talks with Brussels, although they backed down on a promise to hold a referendum on joining the EU.

Iceland has said it wants to maintain "close ties and cooperation" with the EU.

The North Atlantic island is already a member of Europe's border-free Schengen area and the European Economic Area.