Iceland’s Althingi parliament accepted a bill on amendments to the laws on currency issues early this morning. The law amendments give the Central Bank extensive authority to temporarily limit or halt currency flow out of the country.
The laws also provide the Central Bank with the right to demand that Iceland’s export companies transfer all profits earned in foreign currency to Iceland, Morgunbladid reports.
“I strongly suggest that the bill will be withdrawn immediately,” said Vilhjálmur Egilsson, managing director of the Confederation of Icelandic Employers (SA), before the bill was accepted.
Egilsson argued that the laws will cause severe damages to the Icelandic economy, explaining that faith in the Icelandic business environment will dwindle when currency restrictions are prolonged and made more extensive. The Icelandic króna is thus unlikely to appreciate, he added.
Economics professor Gylfi Zoëga disagrees, reasoning that the law amendments are necessary considering that it would be risky to re-float the króna under the conditions of full freedom of capital transactions.
Minister of Business Affairs and Banking, Björgvin G. Sigurdsson, proposed the bill to parliament last night. The purpose, he explained, was to prevent further depreciation of the króna. Sigurdsson also called for increased supervision and heavier sentences on violations of laws concerning financial matters.
Opposition MPs agreed to discuss the bill last night, even though it had been proposed so suddenly that they did not have much time to familiarize themselves with it.