Tuesday, May 20, 2008

Iceland’s nasty financial hangover

Why Iceland is suffering a nasty financial hangover

"Banks all over the world have spent much of the few years bingeing on cheap money, but Iceland's taken the whole thing to quite an extreme." "Joining the Euro would mean offering up a decent chunk of sovereignty at the the EU’s altar. But then, given that interest rates in Iceland are running at 15.5% and that in the Eurozone they remain at 4%, it might also offer the suffering Icelanders the hair of the dog they really need right now."

Posted by damien @ 11:30 AM (690 views)
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One thought on “Iceland’s nasty financial hangover

  • Iceland could join the Euro…. or it could impose capital controls instead (ref: wikipedia: capital control), preventing speculators from tearing its economy to shreds. It would be a bit messy in the short term but in the long term it would guard their independence and stabilise the currency.

    Alternatively if they wanted to keep their fishing rights, they could “dollarize” their economy and use the Euro without actually joining the EU. (ref: wikipedia: dollarization) Obviously this would leave them at the money-printing mercy of the ECB.

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