Banks reportedly halt lending to Icelandic farmers

Banks have reportedly paused lending to Iceland’s agricultural sector ahead of a referendum on whether to resume European Union accession talks, mbl.is reports. Farmers’ representatives say the uncertainty could delay investment and succession transfers in agriculture.

Trausti Hjálmarsson, chairman of the Farmers’ Association of Iceland, said he had heard reports that banks were advising people to postpone matters including the transfer of farms between generations until the referendum result is known.

“This is a rumour we have heard as well, but I do not have clear examples in front of me,” Trausti told Morgunblaðið.

The referendum is scheduled for August 29. Trausti said the uncertainty concerned the future direction of agricultural policy if voters support continuing the accession process, including whether Iceland would eventually join the EU and what kind of agricultural policy would follow.

“Will a new agricultural policy emerge if we join the European Union?” he said. “There is considerable uncertainty about the future, which is causing people to be cautious.”

Even if voters approve restarting the talks, Trausti said it could take two to three years before an accession agreement was reached.

He said freezing financial services for farmers was not a sensible situation, but was understandable given developments in other countries. He pointed to Finland, where agricultural product prices had fallen by 40 percent, and said it was completely unclear what support agriculture would receive from either the Icelandic authorities or the EU.

Trausti warned that prolonged uncertainty could discourage investment, prevent farmers from increasing production and leave the agricultural sector on hold. He said there were already signs that this was happening.

“It is a very bad situation,” he said, adding that Icelandic farmers wanted and were able to produce more food. If voters returned a yes vote on August 29, he said, some farmers might immediately consider giving up because the accession process would be costly and have broad effects, even as there were calls for increased agricultural production.