Iceland Devalues Currency 10% to Aid Fishing Industry

Iceland devalued its crown 10% Monday to help its fishing industry, which has been hit by falling prices abroad.

The government also said it empowered the central bank to devalue the crown by 3% more against a trade-weighted basket of other currencies if and when it deemed this necessary.

The crown traded Monday at 43.22 to the dollar, compared to Friday’s official setting of 38.82.

The devaluation followed overnight meetings by ministers of the three-party, center-right coalition, but Prime Minister Thorsteinn Palsson said the ministers failed to agree on further economic measures beyond a devaluation.

“I am disappointed that we failed to agree to more determined action,” Palsson told reporters.

“If this government does not agree on realistic economic measures then there is little purpose for it to continuing in power,” he added.

Finance Minister Jon Baldvin Hannibalsson said the government would discuss further measures. The three coalition parties set a June 1 deadline for agreement on an austerity package.

The devaluation is the second this year. The crown was devalued 6% on Feb. 29.

Palsson’s administration, comprising his own Independence Party, the Social Democrats and the Progressives, has been fighting to retain the value of the crown while trying to contain 20% annual inflation.

But the fall in fish prices has been a blow to the economy--fishing contributes 70% of export earnings.

Talk of a devaluation prompted the central bank to freeze foreign exchange transactions on Friday and Prime Minister Palsson canceled a planned visit to Washington.