As has been reported on extensively over the last few years, the Icelandic króna, (the world’s smallest independent currency) has been worthless since the collapse in 2008. The country’s Central Bank has enforced capital controls since October 2008 while the government and economists have been trying to find a solution.
Iceland’s Central Bank. Photo copyright Icelandic Photo Agency.
The euro has been the first choice with 80 percent of Iceland’s exports and imports going to or coming from the Eurozone.
However, people have also pointed to the Canadian dollar and the Norwegian krone, with no direct results but Iceland desperately needs a real currency, like the euro, as Iceland’s Foreign Minister Össur Skarphéðinsson said at a conference in Tallinn Estonia last week. “Iceland needs real currency now, but it will take five to ten years to get the euro. And the first step, the most important step, is to join the union, no later than the end of this year.”
Over the Easter weekend, planes have been landing at Keflavík International Airport from Dakar, Senegal, carrying banknotes. Arnór Sighvatsson, Deputy Governor of the Central Bank, has, along with the Governor and the government, been drawing up a secret plan for immediate adoption of the euro (through the back door) and was successful.
Easter is the best time to change currency as the banks and companies are closed for five days. Even the newspapers are not printed.
On Tuesday, when the banks reopen, Iceland will have a new currency, the CFA.
The CFA franc is pegged to the euro at 655.957 for one euro and is therefore equivalent to the euro.
Thus, Iceland will become part of the monetary union backed and guaranteed by the French treasury, which guarantees the free convertibility at fixed parity between the euro and the CFA.
Iceland will join Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, Ivory Cost, Guinea-Bissau, Mali, Niger, Republic of Congo, Senegal, and Togo in using the CFA.
So many will no doubt consider tomorrow a happy day, not only for the economy of Iceland, but for the common people living here.
We will get real money in our pockets, the CFA franc, 655.957 for one euro.
Update: Happy April Fools’!