Saturday, March 3, 2012

Iceland looking at Canadian currency to replace krona

Icelanders have toyed with the idea of doing away with their own krona currency and adopting the Canadian dollar or loonie as it is called since there is a loon depicted on one side. The krona has had its problems ever since the collapse of the Icelandic financial system in 2008.

Iceland has taken the initial steps to join the EU so one might think that the Euro would be a better currency to adopt. However the Euro zone is encountering problems itself.

Canada on the other hand has a strong banking system relatively low debt and a dollar that is just above par with the U.S. The U.S. has a much higher debt than Canada.

The Canadian ambassador was supposed to speak to a group about the issue but the Foreign Affairs Dept. of Canada said the ambassador would not be participating in a convention on currency conversion in Reykjavik the Icelandic capital.

A Bank of Montreal economist said that the conversion could be accomplished simply by Iceland buying enough Canadian currency. This might put some upward pressure on the loonie. The impact on Canada would probably be small as Iceland's population is only 317,000 and the economy less than one per cent of that of Canada. For much moresee this article.

Other countries such as El Salvador and Ecuador have unilaterally changed their own currency for the U.S. dollar. Kosovo did the same for the euro.

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