The North Atlantic island of Iceland has withdrawn its bid to join the European Union, with the government saying that its interests are best served outside the 28-nation EU.

EU spokesperson Maja Kocijancic said Friday that the bloc would "fully respect such a decision," and underlined that Iceland remains an important partner.

Iceland started its membership negotiations in 2010 looking to better anchor itself to Europe two years after its economy imploded amid a banking collapse.

The biggest challenges to those talks were fishing rights and agriculture. The new government froze the EU accession application when it came to power in 2013.

Iceland's foreign ministry had announced on Thursday that the application was withdrawn.