Sigrún Davíðsdóttir's Icelog

Over the last few days, Icelandic business people have aired their worries over the prospect of living with capital restrictions for other four years. It is safe to say that many business leaders in Iceland are decidedly unhappy at the prospect of possibly four more years of capital restrictions since it keeps the Icelandic economy in an unnatural state and creates barriers for companies to operate and grow.

It was rather unfortunate that at the beginning of the year, it seemed, judging by some utterances from Mar Gudmundsson Governor of the Central Bank of Iceland, that the end to capital restrictions might be in sight. The new report from the CBI doesn’t indicate the contrary.

The criticism aired over the last few days shows that some in the Icelandic business community think that CBI overestimates the risk of the destabilising effect resulting from abolishing the restrictions. Their feeling is that a currency flight wouldn’t be of any great danger since the underlying factors in the economy are sound, such as trade balance, well financed banking sector and already a historically weak krona.

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