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Icelanders Interested in using the Canadian dollars as their currency
Sunday, 04 March 2012
To pay for coffee at a diner in Reykjavik, the capital of Iceland with
the dollars could become a reality in the nearest future. We have
found out that there is a serious discussion on that Iceland wants to
adopt the dollar - the Canadian dollar. But reports hold that the issue
is sensitive.
After the financial collapse in Iceland in 2008, the Icelandic krona
plunged to an abyss. The country applied for EU membership, which would
lead to joining the euro. But these days the euro crisis have
ignited a rethink of the move as such new options are seriously
being debated among business people, economists and politicians in
Reykjavik and one of the foremost view is that Iceland should join the
Canadian dollar regime.
In a recent Gallup poll, seven out of 10 Icelanders said they would
happily dump their volatile and fragile krona for another currency.
Their favoured alternative is the Canadian dollar, easily outscoring
the U.S. dollar, the euro and the Norwegian krone.
On Saturday one of Iceland’s opposition parties, the Progressive Party,
likes more the Canadian dollar: "If we are to move to another currency
we see the Canadian dollar as very promising," said party leader
Sigmundur Gunnlaugsson, to the newspaper Morgunbladid.
According to the newspaper, Globe and Mail,
a group of Icelandic businessmen last year contacted the Canadian
ambassador, Alan Bones, and expressed their interest in their country
joining the Canadian dollar regime.
According t the paper, the Bank of Canada referred all calls about the
issue to the Finance Department, where officials were tight-lipped.
There’s a compelling economic case why Iceland would want to adopt the
Canadian dollar. It offers the tantalizing prospect of a stable, liquid
currency that roughly tracks global commodity prices, nicely matching
Iceland’s own economy, which is dependent on fish and aluminium
exports, and in the future, energy.
There’s also a more sentimental reason the Glob and mail adds. They’re both cold, Arctic countries.
“The average person looks at it this way: Canada is a younger version
of the U.S. Canada has more natural resources than the U.S., it’s less
developed, has more land, lots of water,” explained Heidar Gudjonsson,
an economist and chairman of the Research Centre for Social and
Economic Studies, Iceland’s largest think tank.
Iceland is in a bind. The country imposed strict currency controls
after its spectacular banking collapse in 2008. Foreign-exchange
transactions are capped at 350,000 Iceland kronor (about $3,500). A
major downside of those controls is that foreign investors can’t
repatriate their profits, making Iceland an unattractive place to do
business.
Economist Heidar Gudjonsson, head of an Icelandic think tank, is among
those who think that a dollarization would be a good idea of Iceland as
"Canada's exportmix is very similar to ours."
He adds that it's a bit strange that all eight countries of the Arctic
Council, this relatively homogeneous area, have their own currencies.
It would make sense that the entire area would have a more unified
currency.
The Arctic Council includes Russia, Finland, Sweden, Denmark, Norway, Iceland, Canada and the USA.
The Icelandic economy has begun to recover from the financial hurricane
2008 - 2010, but still the economy is practicing a strict policy on
foreign exchange regulations and the issue of future currency regime is
a hot debated question.
By Scancomark.se Team
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