MP says Kristrún’s proposals would have deepened the budget deficit

The Icelandic state’s deficit reflects both the current government’s decisions and unexpected spending under its predecessor, particularly during the Covid pandemic and volcanic activity on Reykjanes, opposition MP Guðlaugur Þór Þórðarson told mbl.is.

Guðlaugur Þór, a member of the Independence Party and Parliament’s budget committee, said it was unfair for government representatives to blame the previous administration alone. He said the deficit last year, combined with the projected deficit this year, exceeded 130 billion krónur and was the responsibility of the current government, which was in office during that period.

The government took power in December 2024 with a budget that was close to balance, he said, but increased spending through four supplementary budgets. Its budget for 2026 then added about 144 billion krónur in spending, an increase of a scale not seen for a long time, he said.

Guðlaugur Þór also said the deficit between 2020 and 2024, which totalled about 688 billion krónur, would have been considerably larger if the government had followed proposals made by Kristrún Frostadóttir, now prime minister.

In an April 2020 interview on the public broadcaster’s programme Kastljós, Kristrún, then chief economist at Kvika Bank, argued that the government should increase support and provide direct grants to businesses, particularly in tourism, rather than rely mainly on loans. The support could amount to 70 billion to 80 billion krónur, she said, with the state taking on part of the losses through non-repayable aid.

At the time, Kristrún had not yet become active in the Social Democratic Alliance. She appeared in the interview as a representative of Kvika Bank. Guðlaugur Þór also noted that she praised the government’s fiscal position, saying few, if any, countries were in a stronger position.