PM says government must not fuel inflation under labor deal

Prime Minister Kristrún Frostadóttir said the state must avoid fuelling inflation as it implements measures under an agreement that will keep collective agreements in force. She described the deal as valuable for Iceland’s economy, mbl.is reported.

The agreement between labour-market parties, the government and municipalities is intended to maintain labour peace through 2027 and until the next collective agreements, through a set of targeted measures. Frostadóttir said the measures would not jeopardise a balanced budget.

She added that the government’s actions are consistent with its economic objectives, the 2027 budget, its parliamentary agenda and its policy statement.

The Confederation of Icelandic Enterprise signed an extension of its collective agreement with VR, LÍV and the trade unions. The deal was reached shortly before 4pm, just before the deadline to terminate the agreements over a failure to meet their conditions.

Frostadóttir made the remarks at a press conference at the Prime Minister’s Residence, called to discuss collective agreements in the private sector.