Professor Oystein Noreng of the Norwegian School of Management argued in his column for Dagsavisen this weekend that Norway should support Iceland financially, and potentially even enter into monetary union with Iceland and jointly co-manage fish stocks.
In his column, Professor Noreng begins by stating his opinion that Iceland is not responsible for paying for the failure of Icesave in the UK and Netherlands due to the fact that it never offered a state guarantee. He added that when Lehman Brothers went under, US funds were insured but not those held by foreigners, including Norwegian local governments – but the American government was not pressured to pay the money back.
The Icesave affair has become so overblown, he believes, because Gordon Brown wanted a crisis to make him look strong before this May’s elections.
Whether right or wrong with the above controversial claims, Professor Noreng then goes on to say he believes there are three main ways for Iceland to recover from its current dire financial situation.
The first is through the IMF route with possible EU membership as well. The second is with help and co-operation from Norway. And the third is with help and co-operation from Russia.
“The IMF has for decades been responsible for a tight market-liberal line, inspired by the United States, and has been a scourge for many developing countries,” he argues.
Russia has the money to help Iceland and would in turn strengthen its position in the North Atlantic as well as becoming a close trading partner. This could be good for both Russia and Iceland, but should be avoided from a Norwegian point-of-view.
Norway is one of the world’s leading creditors and also has the money to help Iceland back to its feet. Iceland would have to clean up its entire financial sector in exchange, including possible prosecutions.
In the long run, Professor Noreng would like to see Iceland adopt the Norwegian krone as a means of stabilising its economy and increasing the size of Norway’s ‘domestic’ market. Deeper union between the countries could become a sort of mini-EU potentially including Greenland and the Faroe Islands as well, which would benefit all when dealing with the EU, Russia, the USA and other international players.
The full article can be read here in Norwegian.