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Will Iceland’s election victors consider adopting Canadian dollar?

These are stories Report on Business is following Monday, April 29, 2013.

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Could Iceland look to loonie again?
Iceland is on the verge of a new coalition government made up of two parties, one of which recently toyed with the idea of ditching the tiny country's currency and adopting the Canadian dollar.

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It's premature at this point, of course, but these are unstable times in the island nation.

To recap, the Independence and Progressive parties came out of Iceland's weekend election leading in votes, and now are discussing forming a coalition government.

Both parties oppose joining the European Union, which is now under negotiation, and the leader of the Independence group wants a referendum sometime in the next two years.

Both also want to keep the currency, the krona, at this point, and both want to scrap the capital controls brought in during the recent crisis.

These two parties, by the way, were the ones in power leading up to the meltdown, but memories appear to be short in Iceland.

Iceland was, of course, the first country to collapse. Before there was Greece (and Ireland, Portugal, Spain and Cyprus), there was Iceland.

The Progressives, however, have discussed the idea of Iceland adopting the Canadian dollar as the country's currency, joining some prominent business leaders in a discussion about a year ago.

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Indeed, the Progressives and the business leaders held a meeting to which they invited Canada's ambassador, who in turn had planned to go to the event until Ottawa scotched the idea.

However, he had planned to tell the meeting that Canada was open to negotiations should Iceland decide that's what it wanted.

Iceland's central bank has said the loonie, as Canada's dollar coin is known, would be a poor choice for the country, but the issue is one that garnered much attention last year.

"It may be one of those topics that gets let out for every so often when economic conditions get difficult, which is what they are in Iceland," said senior analyst Michael Hewson of CMC Markets in London.

"Even so, I'm not sure I understand the logic of ditching one's currency for another given you would lose control of monetary policy," he added.

"If Iceland's political leaders oppose adopting the euro then surely the Canadian dollar would be similarly constraining."

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The loonie is seen as a stable currency in a difficult post-crisis era, tied to a government whose fiscal standing is winning applause around the world. The currency is also gaining favour in the reserves of many central banks.

Would there be a benefit to Canada?

Besides not having to convert your loonies as a Canadian tourist in Iceland, there is what is known as seigniorage, or the difference between the cost of printing a currency and its value.

Basically, the Bank of Canada makes money on the amount of notes in circulation.

Loblaw, Primark to compensate victims
Canada's Loblaw Cos. Ltd. has joined a major British retailer in pledging compensation for the families of victims of last week's building collapse in Bangladesh, The Globe and Mail's Marina Strauss reports.

Some 380 people were killed.

Both Loblaw and Primark PLC, a British fashion retailer with Canadian ties, said Monday they will compensate families, although details have yet to be made final.

"We will be providing compensation for the families of the victims who worked for our supplier," said Loblaw spokeswoman Julija Hunter.

"We are working to ensure that we will deliver support in the best and most meaningful way possible, and with the goal of ensuring that victims and their families receive benefits now and in the the future."

Kinross forges ahead
Kinross Gold Corp. is pushing ahead with a feasibility study on the issue of expanding its Tasiast gold project in Mauritania.

Kinross said today it got good results from a pre-feasibility study, and plans to go to the next step on what would be a $2.7-billion (U.S.) expansion, The Globe and Mail's Bertrand Marotte reports.

"Although there is considerable work to be done at the feasibility study level before we decide whether to proceed with construction, the results of the PFS are encouraging," chief executive J. Paul Rollinson said in a statement. "As we continue to evaluate the project, we remain firmly focused on preserving the strength of our balance sheet."

A new mill would be expected to produce an average of some 830,000 ounces of gold a year over the first five years.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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