More people in Iceland will benefit from Wednesday’s large lottery win than just the elderly couple in Kopavogur who won ISK 107 million. In fact the cost of household debt in foreign currencies could decrease by ISK 300 million as a result.
The couple, who are both old age pensioners, won the money in Wednesday’s pan-Nordic Vikingalotto and intend to spread the money among their five children.
100 million kronur of the money will come from other participating countries and will therefore be paid out in foreign currencies and changed over into Icelandic kronur.
When a large sum of money like this comes into Iceland, it has a positive effect on the krona exchange rate and economists interviewed by Visir.is believe that this single lump payment of ISK 100 million will strengthen the currency by around 0.3 percent.
When the krona’s exchange rate strengthens, foreign currency debts decrease – household debts which stand at around ISK 300 billion today.
This strengthening of the currency, although rather small, will serve to shave around ISK 300 million off that figure.
There are, therefore, more winners than just the couple from Kopavogur.
Consider the economic effect if they’d won last week’s Euro Lottery jackpot instead, equivalent to ISK 20,000 million. That prize is 200 times bigger so, using the same ratio, the krona would strengthen by 60%! From one lottery win.
So this is the SOLUTION!
All Icelanders must start playing lotto…
PS. Who was that brilliant economist who calculated that brilliant solution? ;-)
This just shows how weak the krona is … We should not enjoy the exchange rate can be influence by a lottery prize…
What if a guy like George Soros start looking at Iceland ? (for the remminder He was dubbed “the man who broke the Bank of England.” in 1992)