Government MP calls for Central Bank changes in Iceland

“There is neither trust nor confidence in the abilities of the chairman of the Central Bank of Iceland or its Board any longer, and so the current incumbents should give way and allow others to rebuild that trust and confidence,” wrote Ragnheidur Rikhardsdottir, Independence Party MP in a column in Morgunbladid yesterday. The article’s headline was: “This far and no further”.

The Independence Party is the larger partner in the current coalition government with the Social Democrats, and is known as a right-of-centre, pro-business party. Current Central Bank chairman David Oddsson was the Independence Party Prime Minister from 1991 to 2004 – making him Iceland’s longest-serving PM and one of the longest in Europe.

Also yesterday it was revealed that the Social Democrats had formally registered their dissatisfaction with Oddsson in a cabinet meeting, and Prime Minister Geir H. Haarde publicly restated his support for the Central Bank governor.

Rikhardsdottir said in her newspaper column that monetary policy needs to be re-evaluated, and that Icelanders have only two real options when it comes to currency: to either make the krona work at whatever cost, or to take up the euro. Rikhardsdottir says she believes the idea of reawakening long term trust in the krona is “farfetched”. “The krona and Iceland’s monetary policy have both suffered a great deal and are currently ruining trust, both in Iceland and abroad,” she writes.

In its 17 years in power (with various other coalition partners), the Independence Party has changed Iceland’s financial system beyond recognition. The country used to have one of the tightest-controlled, most state-regulated and nationalised financial sectors in the Western world.

Going too far in the other direction has not worked either; but maybe somewhere in the middle will bring a more sustainable wealth in the future. “We Independence Party members need to take a long, hard look in the mirror,” Rikhardsdottir writes. “We need to inspect market freedom and the associated process of change, and especially our supervision of it.”

icenews.is