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Wed, Feb 04, 2009 - Page 10 News List

Icelandic PM asks three central bank heads to step down

AFP , REYKJAVIK

Iceland’s new prime minister on Monday asked the country’s three central bank governors to tender their resignations in the wake of the country’s economic meltdown, she said in an interview.

“I have requested that they resign immediately and enter discussions on their departure,” Icelandic Prime Minister Johanna Sigurdardottir said in a televised interview on Iceland National Radio.

Many Icelanders have held central bank chief David Oddsson, 61, particularly responsible for the economic crisis, with mounting public protests in recent months calling for his dismissal.

Oddsson liberalized Iceland’s financial markets in the 1990s when he served as prime minister.

A lawyer by training, he has served as central bank chief since 2005.

The two other governors are Eirikur Gudnason and Ingimundur Fridriksson.

There was no immediate reaction from the trio on Monday.

Sigurdardottir, whose left-wing government took power on Sunday after former prime minister Geir Haarde’s left-right coalition collapsed over its handling of the crisis, said her first task as prime minister was to prepare a bill on reorganizing the central bank.

“We have to regain international trust. That is crucial,” she said.

A bill will be submitted to parliament proposing a single central bank governor instead of three, among other things, and the central bank’s supervisory board will also be replaced, Sigurdardottir said.

A change in the law governing the structure of the central bank means that even though Sigurdardottir has only requested the governors’ resignations, they will have little choice but to go.

Even if they were to refuse to resign, the proposed law stipulates that there be only one governor of the bank, to be hired based on his economic expertise and not a political appointment as was the case with Oddsson.

“According to the bill, there will be one professionally hired governor of the central bank. I announced to all of the governors of the central bank today that it is the will of the government to put this bill before parliament,” Sigurdardottir said.

But questions have arisen in Iceland about whether the government has the right to sack the governors, since the central bank is an independent body that functions under the office of the prime minister.

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