Union leader blames government for fuelling Iceland’s inflation

Annual inflation in Iceland has risen to 5.6 per cent, prompting criticism from Vilhjálmur Birgisson, chairman of the Icelandic Federation of Labour and Akranes Trade Union. He told mbl.is that the government had been “throwing fuel on the inflation fire”.

Statistics Iceland published the latest figures on Thursday, showing inflation up from 5.3 per cent and at its highest level in two years. The conditions underpinning current collective agreements have therefore failed. The agreements allow workers in the general labour market to terminate them if inflation exceeds 4.7 per cent at the end of August.

Birgisson said the government had influenced the consumer price index by cutting value-added tax on petrol and diesel from 24 per cent to 11 per cent. That measure expires on September 1.

“In reality, if that measure had not been taken, inflation would be around 6 per cent,” Birgisson told mbl.is.

He also pointed to a rise in university fees from 75,000 to 100,000 Icelandic krónur. On September 1, healthcare co-payments will double, he said, affecting the next inflation measurement.

‘People have given up’

“The task is enormous, and it is obvious that people have given up on it,” Birgisson said. He referred to recent comments by the governor of Iceland’s central bank, who criticised public bodies for continuing to drive inflation.

Birgisson, who has previously said Iceland would be best served by remaining outside the European Union, said the country could not give up and leave foreign parties to solve its inflation problem.

“We will always have to find solutions ourselves, and the Icelandic labour movement has never been unwilling to take part in that process. But when people behave in this way, whether it is the public sector, retail and services, the Confederation of Icelandic Enterprise or others, they erode the trust that is crucial in work of this kind,” he said.

He said the labour movement now had until October 8 to determine whether a solution could be found without terminating the collective agreements.

All parties must pull in the same direction

Birgisson said finding a solution to inflation would benefit everyone. He suggested that the government and municipalities commit to raising fees by no more than 2.5 per cent.

He also said the retail and services sectors could commit to respecting the central bank’s inflation target and raising prices by no more than 2.5 per cent for the remainder of the collective agreement, which expires in December 2027.