Iceland central bank chief joins euro debate

Mar Gudmundsson, the governor of the Central Bank of Iceland, says that joining the euro could still be a good option for Iceland in the wake of its economic crisis. His comments to the BBC come just days after President Olafur Ragnar Grimsson told Reuters that the benefits of euro membership are less clear than ever.

Gudmundsson surmises that the Euroland debt crisis is not the fault of the single currency, but rather of lax banking regulation — just as it was in Iceland. “There is no panacea in terms of the exchange rate regime. You can always get yourself into problems if you try hard enough,” he said.

On the other hand, he said that joining the euro would certainly provide Icelandic businesses and households with a stronger and more stable currency. The volatility and collapse of the Icelandic krona has been very hard for companies and householders to bear and very hard for the central bank to manage, he said.

Gudmundsson predicted that the euro will survive the Greek and Irish debt crises. Iceland has a strong case for joining the EU and talks are already underway. This, despite the fact that a majority of Icelanders say they would vote against joining if the referendum were held today. Pro-Europeans argue that all they need is more time to introduce people to the positives of joining the bloc.

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