Is the Canadian dollar a better extraterritorial currency to adopt than U.S. dollars or Euro?  A discussion in Iceland has been triggered.

… Canada’s ambassador to Iceland, Alan Bones, gave a radio interview saying Canada would be open to the idea of sharing its currency with its northern neighbour.

“We’re certainly open to discussing the issue if Iceland makes that request,” Bones said in the interview with Iceland’s national broadcaster. “[….] But in a straightforward unilateral adopt of the Canadian dollar by Iceland where it’s clear there’s no input into monetary policy then we’d be certainly open to discussing the issue.”  [….]

“This is an issue for the Icelandic government and people,” foreign affairs spokesperson Ian Trites said in a statement released late Friday.  […]

For the moment, it’s a group of Icelandic business leaders and opposition parties who are pushing the idea, with what they say is strong support from Icelanders themselves.

“It’s quite popular with Icelanders,” said David Gunnlaugsson, chairman of the opposition Progressive Party, noting a recent poll found 70 per cent support for the idea of adopting the loonie.

The Icelandic krona is worth less than one Canadian cent at current exchange rates.

The two countries share many features, he says. Both are northern countries with resource-based economies. But more importantly, they’re closely tied by family relations.

Nearly as many Icelanders live in Canada as live in Iceland, due to a massive exodus in the early 1900s to escape volcanic eruptions, he said.

“Of course, the Icelandic government would need to take the first step,” Gunnlaugsson said.

There in lies the problem.

It’s no secret Iceland has been desperate to replace its wobbly krona with a more stable currency after the global financial crisis in 2008 decimated three of its largest banks, along with the country’s economy.

Icelandic government’s response has been to apply to join the European Union with a view to eventually adopting the euro as its currency.

That plans looks less appealing now that the future of the euro is threatened by the ongoing Greek debt crisis.

Canada’s dollar and stable banking system look pretty good to some Icelanders these days.

Full article as “Iceland’s yen for loonie causes diplomatic embarrassment” | Less Whittington, March 2, 2012 | Toronto Star at http://www.thestar.com/business/article/1140013–iceland-s-loonie-idea-adopting-canadian-currency.

Iceland is considering the loonie to replace its wobbly krona. Reports suggest the loonie advocates might be making headway.

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