Finance minister clashes with opposition over Iceland’s state debt

Daði Már Kristófersson, Iceland’s minister of finance and economic affairs, has criticised what he called the endless accumulation of government debt, mbl.is reports. Speaking at a panel organised by the Association of Companies in Financial Services, titled “Higher taxes, lost opportunities?”, he pointed to the state’s debt accumulation under the previous government.

Daði said he was most frustrated that the previous authorities had not accepted responsibility for spending money that did not exist for years.

“From 2019, 2020, 2021, 2022, 2023, 2024 and 2025, there was an endless deficit in the operation of the state, regardless of the circumstances, and then they act as if that bill ends somewhere other than with the Icelandic nation. What is wrong with these people? There is only one way to finance the state. Was she planning to buy a lottery ticket? I simply do not understand this,” Daði said.

He was referring to the previous authorities adding around 900 billion Icelandic krónur to the state’s debt.

Hildur Sverrisdóttir, a member of parliament for the Independence Party, responded that it was unfair to downplay the fact that state finances had been balanced in 2016, 2017 and 2018.

“Does anyone remember what happened in 2019? An entire airline disappeared. Does anyone remember what happened in 2020? A global pandemic, then war, then volcanic eruptions. The direct cost ran into several hundred billion krónur,” Hildur said.

She said the government at the time had been moving in the right direction, with interest rates and inflation falling until the current government took office and changed course.

“And we know where we stand now in that regard. During the last two years under this government, the deficit was increased. Why? Because of some internal political bickering that is always the task of politicians,” Hildur said.

She noted that Bjarni Benediktsson, who was prime minister at the time, had said in his policy address in autumn 2023 that 2025 would most likely be a year without a deficit. That did not happen because other decisions were taken.

Hildur said she supported the goal of balancing state finances, but argued that a billion or two in either direction was not the most important issue when the wider society and its vulnerable and valuable businesses were at stake.

She said everyone needed to remain afloat and that the different parts of the economy had to work together. She called it condemnable that the proposed budget was now expected to increase inflation.

“You will not get applause for that from me, unfortunately,” Hildur told the finance minister.

Daði replied that one billion here and one billion there quickly became 900 billion.