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Iceland adopting the Canadian dollar? - MarketWatch

PORT TOWNSEND, Wash. (MarketWatch) -- Will Iceland get loonie? asked one major Canadian business publication last week. Is that troubled, isolated nation about to shun the European Union and the euro and adopt the Canadian dollar as its currency?

Iceland's fear of the euro collapsing has caused one of Iceland's political parties to openly suggest the idea of going Canadian and dropping the idea of EU membership and currency. (And besides, the just-released see-through Canadian plastic bank notes are waycool.)

Ever since Canadian Business magazine broke the story of Iceland possibly adopting the loonie, the Canadian media has been having a field day with the story. It probably won't happen, but a stable economy (the kind Iceland wants again) needs a stable currency. Like Canada's.

The Bank of Canada, for its part, says it will be glad to sell Iceland all the Canadian notes and coins it wants. And that's all it'll say; it doesn't comment on other countries' monetary policies.

Iceland's krona has taken a battering since the collapse of the country's three major banks in 2007. The country is still struggling to recover from that speculative disaster, and the krona is still being called a glorified poker chip. Iceland's economy may be off life support, but it's still in serious condition.

The krona is roughly 40% from its 2007 peak. Capital controls put in place after the crisis restrict the flow of money into and out of Iceland and keep the currency stable. But if the controls are removed too soon, the krona could crash again, while keeping them for too long discourages foreign investment. Not a good situation.

Joining the EU, which Iceland saw as a way to attain a stable currency, doesn't look like much of a lifeboat these days. Fellow northerner Canada looks like a viable Plan B to some in Iceland these days.

Aside from worries about EU stability, many Icelanders are concerned about the loss of autonomy that comes with joining, particularly if it means less control over their prized fishing industry.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Mar 6th, 2012 at 02:10:00 PM EST
I take it they have some sort of objection to the also hyper stable Norwegian Krone.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Tue Mar 6th, 2012 at 02:44:18 PM EST
[ Parent ]
If the Icelanders decide to dump the krona they will be more likely to move to the Norwegian krone than the Canadian dollar.  There's a thousand years of cultural and social ties to Norway, Icelanders have warm fuzzies for Norway and Norwegians, and Norway shares the Icelandic determination to protect their fisheries.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Tue Mar 6th, 2012 at 03:11:44 PM EST
[ Parent ]
I take it some Icelandic parties are nuts. Why would they prefer to be have another currency when they so well have demonstrated the advantages of having their own.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Mar 6th, 2012 at 03:28:39 PM EST
[ Parent ]
Stable currency?

Someone should tell them that the oil induced appreciation of Loonie is fueling the return of manufacturing that had gone from the US to Canada when the Loonie was weak during the 1990s. That's one of the things that I think was misrepresented in the Canadian press during the whole flap over the closing of a the Caterpillar plant in Hamilton, ON at the same time that there was hiring going on at the new plant in Indiana.

People talked about the wage differential between $30/hr Canadian against the new wage rate of $14/hr at the Indiana plant as though they had always been roughly equal.  Truth of the matter is that if the exchange rate is the same as it was back in 2002, that that $30 Canadian wage would only come up to $19.11 in US dollars.  With the added health care cost on the US side, it's clear that much of what's driving the outsourcing of Canadian jobs to the US is the rising loonie, which makes Canada a lot less cheap in American dollar terms. And this only looks to continue as oil sands production increases.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue Mar 6th, 2012 at 03:22:23 PM EST
[ Parent ]
So the drama of Greece with its problems tremendously aggravated by lack of control of its currency isn't enough to scare the Icelanders???
by asdf on Tue Mar 6th, 2012 at 03:29:58 PM EST
[ Parent ]

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