Ambassador Þórður Ægir Óskarsson was the keynote speaker for the INL of NA convention Opening Ceremonies
Þórður Ægir Óskarsson
Icelandic Ambassador to Canada
Just three months have now passed since I took up my duties as the Ambassador of Iceland to Canada.
To have the opportunity to address this Convention is a privilege for an Icelandic ambassador since what better manifestation can be found of the close and constructive links and deep friendship between the people of Icelandic ancestry in the
two great states of North America
and Icelanders from the home country.
It is events like this that provide the sense of community that has, during the decades, so successfully linked Canadians and Americans of Icelandic origin together. It reminds us of the remarkable story of the Icelandic immigrants, your ancestors, who so bravely fought adversity and hardship in order to create a better future for themselves.
What is even more fascinating is the preservation of our common heritage here on this side of the Atlantic Ocean, a heritage that was cultivated for a long time under difficult circumstances in the absence of modern means of instant communication. It is that hard reality that, with passing time and new generations, the effort to preserve this heritage becomes more difficult. This is particularly relevant in the current environment when forces of globalization reach all activities.
We in Iceland have seen this challenge in the context of the Icelandic language, the foundation of our national identity. The traditional respect for writing and literature is still there and the poets and writers are still to a great extent our heroes. However, Iceland, this small homogenous state with its own language, has been drawn into the powerful processes of modern day globalization that can be both a blessing or a risk, both to our cultural identity and the core of it, the Icelandic language. I think the awareness of the risks and threats to our language is strong, but it needs a lot of work.
What I have said is nothing new to you. This has been part and parcel of the message you have received from the many great leaders of Iceland who have visited you in the past. And, like every Icelander who visits you and learns about your activities and the sincere respect for your heritage, I have become a true admirer. You who do so much to preserve and reinforce the continuity of these bonds deserve praise of the highest order. Iceland, of course, takes a certain pride in your achievements as Canadian and American Icelanders.
In Ottawa, I have quickly learned that Iceland enjoys an extensive and deep founded goodwill in Canada. I’m more than convinced that this goodwill is created first and foremost by the constructive contribution of the Canadian Icelanders to the development of this lovely and great country. In fact, in a private meeting with your Governor General, Mr. Johnston, this was his main message. When I met him on March 8, he stated that the contribution of the Icelandic Canadians to the development of Canadian society was exemplary and that “they punched well above their weight.”
Of course, there is always a certain imbalance in the relations of a country with over 30 million inhabitants and a country with 300 thousand inhabitants. To keep these relations harmonious it is important to keep working for increased mutual understanding and cultural awareness among our peoples. I am convinced that we have made good progress in that regard, in particular over the past two decades or so. The establishment of the Embassy here in Canada and the Consul General Office in Manitoba were important steps to deepen out relations. Without forgetting the importance of the big events such as the Millennium program, building solid bilateral relations is always a long distance run. You understand this as it is so well reflected in the Snorri programs.
My mission here in Canada is actually not very complicated and the goals are similar to those of other ambassadors to Canada, that is, to promote my country’s interests. But we are small fish in a big diplomatic pond so we have to swim faster than everyone else to be heard.
The pillars of our activity are the following. They are interdependent and build on each other:
First I would like to mention the need for stronger and more active political ties. We have in place the strong bonds that history and culture has bestowed upon us. We need to expand these relations more effectively in Ottawa, where there is not great awareness of this rich history.
Canada and Iceland are members of the same international organizations and base their political system and foreign policy on the same values. There are some differences, but the commonality is stronger. We are looking forward to a visit by Foreign Minister Skarphéðinsson later this year and the visit of the Foreign Relations Committee in the fall. It is critical that these visits are used as building blocks to more regular and substantial relations.
We understand that the government of Iceland discussed the terms of our proposed resolution of the Icesave dispute with the governments of the UK and The Netherlands. However, the UK and The Netherlands rejected this proposal. Last December, the European Free Trade Agreement (EFTA) Surveillance Authority referred the case to the EFTA court in Luxembourg. In March of this year, Iceland lodged its defence with the EFTA court. Other EFTA and EU member states will now be given an opportunity to submit their observations during a hearing in the second half of this year.
Importantly, it now appears virtually certain that the liquidation of the assets of the Landsbanki estate will be able to cover 100% of the principal amount owing to the UK and The Netherlands by the end of this year. Sixty-seven percent of the amount owing has already been dispersed from the sale of Landsbanki assets. It would appear that the Icesave saga will come to a successful conclusion by the end of 2012. This conclusion will remove one significant barrier to the relationship between Iceland, the UK/The Netherlands and other members of the EU.
There has been considerable media coverage about the remarkable economic and financial recovery of Iceland compared to the situation in Ireland.
While Iceland probably did not have much choice, the government did not bail out the banks and burden its citizens with a huge amount of additional debt. Also, Iceland was fortunate to have its own currency, which was allowed to depreciate by 58% during the financial crisis. The country created “good banks” and “bad banks” with questionable assets being transferred to the “bad banks”. Primarily as a result of these factors, Iceland’s economy has stabilized and experienced 3.1% GDP growth during 2011 and a similar growth is expected this year. The unemployment rate in Iceland is approximately 7.2% and Iceland’s debt to GDP ratio peaked at 85% and is declining. Iceland has emerged from the International Monetary Fund (IMF) Assistance Program and returned to international capital markets a year ago to raise USD 1 billion. The Fitch Rating Agency upgraded the country’s bonds to investment grade. Nobel Laureate Joseph Stiglitz stated: “Iceland is a success story” and “It has managed to return the worst crisis to recovery”.
By comparison, the government of Ireland bailed out the banks and the country’s taxpayers are now burdened with a huge amount of additional debt. Debt to GDP has risen to 120%, the unemployment rate is 15% and the economy is not growing. Because Ireland was a member of the EU, Germany and other EU countries insisted on Ireland bailing out their banks because banks in their countries held a significant amount of Irish bank debt. Also, because Ireland had adopted the euro, it did not have the flexibility to allow its currency to depreciate like Iceland did.
There has been considerable media speculation about Iceland’s currency alternatives – adopting the Canadian dollar, adopting the euro, adopting the Norwegian kroner, or simply sticking with the Icelandic króna which it has used for 137 years. Media speculation began when Iceland’s new Minister of Finance stated that she was in favour of Iceland joining the euro, notwithstanding the huge fiscal and economic challenges facing all members of the European Union. Naturally, for good reason, many Icelanders were not in favour of giving up their sovereignty and becoming a member of the European Union.
If Iceland had been a member of the EU during its financial crisis of 2008, it would likely be in a similar position to that of Greece and Ireland today. It would not have been able to devalue its currency to restore its competitive position, because its currency would have been the euro.
There are also significant challenges associated with Iceland’s fishing industry and its ability to enter into free trade agreements like the one that currently exists between Iceland and Canada.
The other three alternatives to continuing with the króna were to consider adopting the US dollar, the Canadian dollar, or the Norwegian kroner. Logically, Iceland should prefer the Canadian dollar to the US dollar, given the close ties between Canada and Iceland and given the fact that the Canadian economy is in much better financial condition than the US. Iceland might also prefer the Canadian dollar to the Norwegian kroner because it may not wish to cede its sovereignty to another Scandinavian country, given the historical relationship between Iceland and Denmark, Norway and Sweden. Consequently, the rest of my remarks will be focus on the pros and cons of Iceland adopting the Canadian dollar.
The decision on whether or not to pursue the possibility of Iceland adopting the Canadian dollar will be made by the government of Iceland, but it would likely be subject to a referendum. Also, it is not known if Canada would be interested in discussing this possibility. Before the government decides whether or not to pursue this possibility, it needs to take into consideration the potential benefits and the potential risks of such a decision.
There are a number of benefits to the business sector in Iceland of adopting the Canadian dollar, including: Access to broader range of investors for Icelandic bank, corporate, and government debt with potential lower borrowing costs. Access to a first-rate financial regulatory system. Removal of foreign exchange controls would facilitate direct foreign investment.
There are significant political challenges and risks associated with such a decision. These include: The population of Iceland is only 1% of the population of Canada – 320,000 vs 33 million. Iceland would be giving up all control over monetary policy. Monetary and fiscal decisions for Iceland’s economy would be made in Ottawa, not Reykjavík. There is a long distance between Ottawa and Reykjavík as well as a four-hour time zone difference. If Iceland had not had its own independent currency, the króna, during its fiscal crisis of 2008, but had already adopted the Canadian dollar prior to that date, it would never have been able to position its economy for the dramatic economic and financial recovery that it has achieved. In the future, the exchange rate of the Canadian dollar vis-à-vis other major currencies may be inappropriate for Iceland’s economic situation. Not many Icelanders would recognize the pictures of former prime ministers of Canada on some of our currency
I am sure all of us in this room would like to strengthen the relationship between Canada and Iceland through increased trade, investment, tourism, sharing our unique cultures, student exchanges and capitalizing on our mutual interest in the Arctic. However, even if both countries are interested in strengthening our relationship, we can still achieve this objective even if we don’t have a common currency. The relationship between Canada and the United States is a classic example
The pros and cons of Iceland adopting the Canadian dollar should be subject to an extensive public debate in Iceland. The first opportunity arises in Toronto on May 15 when the Fraser Institute is hosting a Policy Briefing on “Understanding Iceland: Lessons for Greece? Currency Partner for Canada?”. A prominent delegation of 11 Icelanders representing the business, academic and political sectors will be attending. I plan to attend this event and look forward to a spirited discussion on this subject.
From the keynote address during the 2012 INL of NA convention