ICELANDIC PRIME MINISTER TO BUSINESS COMMUNITY: STAY THE

UNCLAS REYKJAVIK 000066 SIPDIS USDOC FOR LEAH MARKOWITZ TREASURY FOR LAWRENCE NORTON STOCKHOLM FOR KEITH CURTIS SIPDIS E.O. 12958: N/A TAGS: ECON EFIN IC SUBJECT: ICELANDIC PRIME MINISTER TO BUSINESS COMMUNITY: STAY THE COURSE REF: Reykjavik 55 ¶1. (U) Prime Minister Geir Haarde gave a pep talk to the top Icelandic businessmen assembled at the annual meeting of the Federation of Icelandic Employers on April 18, and put to rest rumors that the solution to Iceland's recent economy problems is unilaterally adopting a foreign currency. Haarde said Icelanders should not be discouraged by recent short term profit reduction and emphasized that Iceland has a "unique and enviable status." He ticked off a list of positive attributes including a fully funded pension system, a sophisticated fishing sector, a large tourism sector, new and growing high tech sector and the country's vast energy resources that are becoming more valuable by the day. He also reminded everyone of the progress Iceland had made over the last 17 years with membership in the European Economic Area, privatization and tax reform. Haarde assured the audience that the government and the Central Bank are working very hard to resolve the recent problems, but that patience and discretion are required. ¶2. (U) Haarde said in no uncertain terms that Iceland would not unilaterally adopt a foreign currency. He laid out two options: 1) stay outside of the European Union and keep the Icelandic krona or 2) join the EU and adopt the Euro. Haarde said the latter was the worse option. He cited lost of sovereignty in bilateral Free Trade Agreements, financial management and fisheries as the primary reasons. He noted that he had appointed a committee to study if and how Iceland's interests could be protected as members of the European Union, and said it was ridiculous to claim that the EU membership issue was not being discussed by his government. He closed the speech by saying the economy is going through temporary problems caused by foreign circumstances over which Iceland has little control. He said Iceland's good living standards and valuable resources will lead the country "out of today's turmoil and provide a path to a better future." KLOPFENSTEIN