To restart an icy economy and free its citizens from strict Soviet-style money controls, all Iceland needs is a single planeload of Canadian dollars, a pair of Iceland economists told a packed Bay Street conference room Monday afternoon.
“It would fit nicely in a small plane, we just have to make sure it doesn’t get lost on the way,” said Heidar Gudjonsson, an investment manager and the chairman of Iceland’s Centre for Social and Economic Research.
Mr. Gudjonsson, along with University of Iceland finance professor Ársæll Valfells, were in Toronto on Tuesday to make the first pitch to a Canadian audience on a unorthodox proposal to to pull the debt-ridden Nordic state from recession by abandoning the Icelandic krona for the Canadian dollar.
Icelanders are united on the need to ditch the krona. However, the country’s reigning Social Democrats want the Euro, while the opposition Progressive Party has been pushing for the Canadian dollar since last summer. As resource economies, Canada and Iceland’s economic cycles are more likely to be in sync, loonie proponents argue. Also, Canada is home to about 200,000 people of Icelandic descent, more than anywhere else in the world. “I see that connection helping the public in Iceland accepting a new currency,” said Mr. Gudjonsson.
So far, the loonie appears to be winning. A March Gallup poll showed public approval for the loonie easily pulling ahead of the U.S. dollar, the euro and the Norwegian krone.
The mechanics of the swap would be the easy part. A party of Icelanders officials would simply fly to a Canadian bank and arrange a $300-million withdrawal. The final pile of multicoloured bills — no larger than two photocopiers — would then be shipped across the North Atlantic and loaded into ATMs and bank vaults over a weekend. (While there is far more than $300-million in the Icelandic money system, the country currently only has $300-million worth of krona coins and bills in circulation.)
Short of imposing its own Iceland-style currency controls, the Bank of Canada has no choice in the matter. “We will do it unilaterally without asking,” said Mr. Valfells. “It’s better to ask for forgiveness than permission.”
In the resource-rich Arctic, Mr. Gudjonsson said, a Canada-Iceland currency union could be the cornerstone of a Canadian-led polar juggernaut. With Iceland on the loonie, Greenland — which only recently declared independence from Denmark — could soon follow, he said.
“If you look at it from a strategic perspective, instead of one country at the Arctic Council using the Canadian dollar, you’d have three,” Mr. Gudjonsson.
source:
If Iceland adopts the loonie, Greenland could soon follow: economist | News | National Post
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