From Iceland — Jury Still Out on Euro

Jury Still Out on Euro

Published March 27, 2009

The discussion on taking up the euro, joining the European Union, or both continues in Iceland.
As it is, both the Social Democrats and the Progressives are in favor of joining the EU, while the Leftist-Greens and the Liberals are not. The Conservatives used to also be quite opposed to joining the EU, but that has been changing more and more recently.
Underscoring this is a recent report from the European Committee for the Conservative Party. Their economic conclusion, among other things, was that it is necessary to exchange the crown with the euro as Iceland’s currency, either by a one-sided adoption, or joining the EU. The committee itself makes no recommendations with regards to joining the EU, but they do believe that there are two predominant points of view. First, complete opposition on the grounds that this would surrender Iceland’s sovereignty over its resources (in particular, with regards to fishing waters). Second, that negotiations to join the EU could begin on the grounds that Iceland has the final authority over its resources.
While the Conservatives seem to be warming to the euro, economist Edda Rós Karlsdóttir, speaking at an annual conference at the Confederation of Icelandic Labor Unions, warned that the euro is no “magic solution”.
She pointed out that foreign loans to Icelanders would have increased by 25% even if the euro had been the currency here, as a large part of the loans are in yen or Swiss francs. While Karlsdóttir believes the euro could quickly bring Iceland into economic recovery, a sound economic policy is still necessary to provide a foundation for renewal.

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