Iceland Seeks Stable Currency
January 10th, 2009 at 5:41 pm - by Kit Sauder
After one of the fastest economic collapses in history Iceland’s economy is reeling. The Icelandic Krona is now worth 0.008 USD, and has been fluctuating wildly.
Iceland rapidly developed through the 1990’s from a country of mostly smelters and fisherman to an economic rising star which bought up many Danish and British companies. At its peak Iceland bought up £894 million worth of British companies. For a country which was voted the United Nations “Best Country to Live In” in 2007, Iceland has experienced a massive reversal of fortune. At the same time Haiti was experiencing riots due to the soaring price of oil and grain prices, Iceland was experiencing the wobble which, would result in the collapse of three of its major banks and their eventual nationalization through passing of emergency legislation. Both of which, should have been viewed as far more relevant indicators of the times than they were. The governing Independence Party recently received a report projecting the bankruptcy of 3500 Icelandic companies within the next 12 months.
This should not come as a surprise as the Icelandic economy is the smallest in the OECD, with an annual GDP of 19.8 billion USD on average. Furthermore, Iceland holds the dubious title of highest inflation rate, sitting at 17.2% for 2008. The Icelandic economy still relies heavily on fishing and smelting, with a collapsed Atlantic fisheries and soaring commodities prices, this bodes ill for the free falling Krona. That’s why it comes as no surprise that in a recent gallop poll 56% of 1,200 polled support adoption of a foreign currency while only 22% oppose any such action.
Of the 56 per cent in agreement, 70 per cent voted in favor of adopting the Euro, while 20 per cent favored the Norwegian currency; the Crown.
There has also been talk of tying the Krona to either the Canadian or American Dollars. We’ll have to wait and see what this Land of the Midnight Sun decides to do to gain stability; as it stands now the Iceland in 2009 and that of only a year ago are as different as night and day.
