Birgir Ísleifur Gunnarsson: Monetary issues in the European Union and Iceland Speech by Mr Birgir Ísleifur Gunnarsson, Chairman of the Board of Governors of the Central Bank of Iceland, at a seminar organised by the Iceland Trade Council, Euro Info office in Iceland and the EU Commission on the theme: Does the Euro affect Iceland?, Reykjavik, 31 October 2001. *  *  *  Ladies and Gentlemen: The evolution of European integration during the second half of the last century is remarkable in many ways. This process began soon after the end of World War II and represented an effort to forge stronger bonds between European nations and thereby, among other things, reduce the likelihood of further conflict on the continent. Although I shall not go into its history here, many notable milestones can be cited along the course that has been taken. One of the most notable was the formal establishment of the Economic and Monetary Union in the beginning of 1999. Now the abolition of the individual member nations’ separate currencies is in sight. As of next year they will be replaced by Euro notes and coin. Not only will prices of goods and services be calculated and stated in a single currency in the twelve EMU countries, but the same notes and coin will be used for business in them all.
Iceland has chosen to remain outside the EU and has not declared an interest in membership. If Iceland were to show an interest in adopting the Euro as its currency, the most obvious course would be to join the EU with all the advantages and obligations that this entails, including membership of the EMU. Such a decision, however, depends on more factors than just the national currency, and this process would take a good many years. Of course, this is a highly political question and therefore outside the scope of this address. We need to continue to find our bearings in the global community as a nation with its own currency, which in an environment of free capital movements calls for very disciplined economic policy implementation. Ladies and Gentlemen: Representatives of all EU countries were involved in formulating and developing the Economic and Monetary Union. They created a monetary framework within the EMU which they regarded as serving the Community’s citizens best. Although Iceland stands outside the EMU, we have incorporated into our monetary policy implementation much of what the EU countries agreed that best served their interests. I am convinced that we will benefit from this. BIS Review 95/2001  5