Belfast Telegraph

Saturday 25 October 2014

Cold comfort as Ireland skis down Icelandic slope

An old joke which did the rounds when Ireland's economic crisis first hit was that all that separated it from the fate of Iceland - which was forced to call on International Monetary Fund loans and nationalise its banks two years ago - was the second letter of their names.

Now that Ireland has fallen back on the help of the IMF, and its two main banks are on the way to becoming fully nationalised, has the old joke become a self-fulfilling prophecy?

But just like no-one in Ireland really believed its economic fate could be as dark as that of Iceland, the economic travails of Ireland have not put Iceland off a long-cherished dream of joining the euro.

The governor of the country's central bank has said that joining the euro could still be a "good option" despite the crisis.

Mar Gudmandsson told the BBC that the current problems in the eurozone were down to the weakness of banking regulation and not the frailties of the common currency.

Iceland embarked on membership talks with the European Union earlier this year, and Mr Gudmandsson gave BBC World Service an insight into his views of how talks are progressing.

"There is no panacea in terms of the exchange rate regime. You can always get yourself into problems if you try hard enough," he said.

He said that the plummeting value of Iceland's currency after the banking crisis had been "very difficult" for businesses and ordinary Icelanders alike, and joining the euro would lessen the risks for the financial sector. And even though the eurozone seems to be suffering from acute influenza, with the single currency widely blamed for putting it in intensive care, Mr Gudmandsson said it was the fault of the banks, which were "undercapitalised".

Iceland is viewed as having a strong chance of getting into the eurozone because it already has close trading and economic links with the UK. But as can often be the case with old friends, money has come between Iceland, the UK and the Netherlands after the latter two helped out over the collapse of Iceland's online bank Icesave to the tune of £3.1bn.

Iceland Express yesterday announced new routes to Belfast International Airport and Dublin.

Could this bring Ireland and Iceland closer together? Ireland may enjoy Iceland's tourism offer, and vice versa - but learning from each other's messes could be enlightening.

n Finance Minister Sammy Wilson has highlighted the need for the Executive to prioritise growing the economy.

The minister was delivering a keynote address at a Strabane Chamber of Commerce event this week.

"I am firmly of the view that growing our economy must continue as the number one priority if we are to improve living standards locally," he said.

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