Newsline: Iceland’s interest in Canadian dollar causes diplomatic embarrassment

March 3, 2012 at 7:02 am · Filed under Canada, Iceland

The dream of some Icelanders of adopting the Canadian dollar as the country’s official currency turned into a diplomatic headache in Ottawa. The problem began when Canada’s ambassador to Iceland, Alan Bones, gave a radio interview saying Canada would be open to the idea of sharing its currency with its northern neighbour. “We’re certainly open to discussing the issue if Iceland makes that request,” Bones said in the interview with Iceland’s national broadcaster. “What we know about the nature of the final agreement depends very much on the expectations of both countries. But in a straightforward unilateral adopt of the Canadian dollar by Iceland where it’s clear there’s no input into monetary policy then we’d be certainly open to discussing the issue.” Bones comments came in advance of a speech he was to deliver Saturday at a currency conference in Iceland. But after his remarks hit the headlines, Ottawa said Bones would “not be participating in the Icelandic conference tomorrow on currency matters, and will not be speaking on the issue.” Ottawa also said it doesn’t comment publicly on other countries’ currencies. “This is an issue for the Icelandic government and people,” foreign affairs spokesperson Ian Trites said in a statement released late Friday. Part of the problem is the government of Iceland hasn’t made an official request. Instead, the currency issue is the subject of a developing political battle within Iceland. For the moment, it’s a group of Icelandic business leaders and opposition parties who are pushing the idea, with what they say is strong support from Icelanders themselves. “It’s quite popular with Icelanders,” said David Gunnlaugsson, chairman of the opposition Progressive Party, noting a recent poll found 70 per cent support for the idea of adopting the loonie. The Icelandic krona is worth less than one Canadian cent at current exchange rates. Nearly as many Icelanders live in Canada as live in Iceland, due to a massive exodus in the early 1900s to escape volcanic eruptions, he said. It’s no secret Iceland has been desperate to replace its wobbly krona with a more stable currency after the global financial crisis in 2008 decimated three of its largest banks, along with the country’s economy. Icelandic government’s response has been to apply to join the European Union with a view to eventually adopting the euro as its currency. That plans looks less appealing now that the future of the euro is threatened by the ongoing Greek debt crisis. Canada’s dollar and stable banking system look pretty good to some Icelanders these days. Iceland’s population is just over 300,000 and its economy is less than one per cent of Canada’s. There are precedents. El Salvador and Ecuador have both unilaterally adopted the U.S. dollar in the past dozen years, and Kosovo has the euro.

http://www.thestar.com/business/article/1140013–iceland-s-loonie-idea-adopting-canadian-currency

Comments