the sooner trust and faith begin to grow again in world markets, the sooner they will rise up from this slump, or recession – at the moment we don ’ t know which term is more appropriate. many things are changing, both in iceland and elsewhere. a new edition of the book “ ten little negroes ” causes ripples of unrest. of course, there is no reason to ban books, but the unrest caused by this book is actually a positive thing. it is a sign of changing times, enhanced understanding, and diminishing prejudice. when that book was published in the mid - 20th century, hardly anyone thought of it as being hurtful or offensive in any way. but now we see that it can indeed be those things, and this is why the publication of the book and the ensuing discussion are a positive indication of new times and changed perspective. actually, recent decades have seen a fervent effort to recast well - known terms and names for all sorts of phenomena so as to avoid injuring those who, either temporarily or for the long term, might be vulnerable. this is also positive, though some of these philanthropic efforts have gone a bit too far in their enthusiasm. another phenomenon we see is that newly coined terms soon become cloaked in a sort of semi - divinity in iceland – like the term “ international expansion, ” which no one dares oppose lest he be accused of being an anachronism, devoid of a sense of “ vision, ” as it is now called, and of not knowing when the time is ripe for action. upon closer scrutiny, the term “ international expansion ” seems to be nothing more than investment abroad – together with utilisation of knowledge and talent, of course. in that sense, the construction of the aluminium smelter in reydarfjordur can be called alcoa ’ s international expansion into iceland, though no one has bothered to call it that. but it is : it is investment combined with the utilisation of knowledge of the aluminium industry. that expansion is promising in many ways, of course, and some aspects of it have already generated substantial returns, not least because people took advantage of favourable conditions and external circumstances. for a while, cheap capital was readily available, and some were bold enough to grab the opportunity. but the flip side of expansion, and the side that cannot be ignored, is that iceland is becoming uncomfortably beleaguered by foreign debt. at a time when the icelandic government has

fulfilling expectations concerning membership itself and by the decisions of the central bank. although a number of arguments indicate that currency union membership would suit iceland well, it is not certain that a majority of the electorate will vote in favour of european union membership in a national referendum. the fact that a number of eu member countries are in intervention would normally be sterilised in order to prevent undesirable effects on money supply. hence the impact on the exchange rate is unlikely to be large or lasting. according to current targets, the authorities aim to reduce gross public sector debt to 70 % of gdp by 2015. bis central bankers ’ speeches financial distress, not least those permitted to join the emu through rather liberal interpretation of the maastricht criteria, does not increase the likelihood that the referendum would pass. although the performance of a currency union should be evaluated rather in the light of price stability, which is the principal task of the area ’ s central banks ( and where performance has been strong ), than in the light of fiscal performance, which is the responsibility of individual member states, or financial stability, which – unfortunately – is still largely the province of individual member states, it is not unlikely that the problems facing the euro area will affect voters ’ choices. the looming financial and sovereign debt crisis in the periphery of the euro area poses a problem for the conduct of the common monetary policy that must be solved. in the event that membership is rejected, it would be appropriate to consider other options. the measures i mentioned earlier could improve performance without radical changes. how successful they are will be determined to a large extent by the strength of political support for the reforms. for example, will those who consider the decisions of the independent monetary policy committee “ crazy ” agree to place further tools at the disposal of the central bank or an independent financial stability committee? the combination of short - sightedness and populism that has long characterised economic and monetary discourse in iceland is a roadblock to enhanced stability. consequently, i am not optimistic that a modified fixed exchange rate regime, such as that pursued in iceland before the inflation target was adopted in 2001, will be successful. 7 in the event that currency union membership is not an option, the question arises whether it would still be desirable to remove the temptation and source of instability represented by a flexible or floating exchange rate, either through a currency board or through unilateral adoption of another currency. the preconditions for such radical steps to be sensible are much farther