Iceland should replace the krona with the Canadian dollar if it wants to stabilise its shaky economy, two financial experts have suggested. Arsaell Valfells and Heidar Gudjonsson told an economics forum in Toronto this week that the government should not discount the idea of adopting Canada’s currency, even though it says it will join the euro if accepted into the EU.
Gudjonsson, who is chairman of the Centre for Social and Economic Research think-tank, said that if the change was made, foreign investment would return to Iceland, helping boost the country’s economy to the level seen before the 2008 banking crisis. He added that Icelanders would happily accept the currency due to close historic ties between the northern neighbours.
“If Iceland would adopt another currency, it would immediately cut interest rates in half, which would mean massive improvements for households, and that would also help drive investments, create jobs and increase disposable income,” Gudjonsson said.
He added that the practicalities of the change could be very simple, as Iceland would just need to buy around CAD 300 million, ship them over and pass an emergency law to make it the official currency. The economist Gudhonsson the Icelandic government could do this in “about one weekend”, and even without Canada’s permission. They could, “get the money on Saturday and it’ll be in the banks by Monday,” he claimed.
However, Gudjonsson admitted that a more likely course of action would be for Iceland to discuss the matter with both Canada and the International Monetary Fund in a process that would take about three months. He said picking an exchange rate would only take about “one hour”, with around ISK 125 to the dollar the most likely outcome.