Daniel Gros, director of the Center for European Policy in Brussels who assisted Montenegro on adopting the euro without joining the European Union, recommends Iceland do the same and that they do so as soon as possible.
Gros agrees with two Icelandic economists, Hreidar Már Gudjónsson and Ársaell Valfell, who proposed in their analysis, published in Fréttabladid, that Iceland should use their currency reserves to change their legal currency instead of seeking loans worth USD 6 billion (EUR 4.7 billion).
EU Central Bank, Frankfurt, Germany. Copyright: Icelandic Photo Agency.
“I absolutely agree with the main arguments in their analysis,” Gros told Fréttabladid. “I especially agree with their warning that these loans, which the government intends to take, will place a heavy load on entire generations. It has to be avoided with any means necessary.”
Icelandic authorities and an IMF delegation reached an agreement in late October that Iceland would submit a formal request to the IMF board on a USD 2.1 billion loan (EUR 1.7 billion).
The remaining USD 4 billion would then be contributed by other countries. Norway, the Faroe Islands and Poland have already confirmed that they will contribute to the IMF-led loan package. However, the IMF board has yet to accept Iceland’s request.
Gros said the best option for Iceland right now is not to accept these loans but rather to adopt the euro. “I would not wait until January to change the currency. It can happen almost immediately.”
According to Gross, adopting the euro without joining the EU would not necessarily cause political disputes between Iceland and the union. “[Not] if Iceland explains that this is an emergency measure and that Iceland understands perfectly that it will have to fulfill the statutes of the Maastricht treaty in the near future.”