The Canadian ambassador to Iceland says that the authorities in Ottawa are willing to start talks that could see the Canadian dollar become the national currency of Iceland – if that is the will of the Icelandic people.
The ambassador, Alan Bones, will give a short speech at tomorrow’s meeting of the Progressive Party which will discuss the unilateral adoption of another currency to replace the Icelandic króna. RÚV reports the ambassador as saying that his government is ready to discuss Iceland’s adoption of the dollar if the Icelandic government requests such talks.
He said that an eventual treaty would try to accommodate the best interests of both governments; adding that if Iceland adopted the Canadian dollar unilaterally its government would obviously have no say on monetary policy – making it in the country’s interest to negotiate a treaty beforehand.
There are many examples of countries unilaterally taking on the currency of other nations – although no country has chosen the Canadian dollar to date.
Alan Bones says it falls to the Icelanders to discuss the matter internally and decide if the benefits of a stable currency outweigh the negatives of losing control over monetary policy and losing the ability to deal with economic shocks, as in autumn 2008, by devaluing their currency.
There has been serious discussion in Iceland about ditching the króna since the crash and one of the key reasons for Iceland’s EU application is the possible eventual adoption of the euro. Others have been calling for the country to take up other currencies, and the Canadian dollar has been a popular choice. Still other voices maintain that the expense and instability of the króna are inconveniences worth enduring for having control over monetary policy and the ability to devalue.