Union leader says Iceland can bring inflation down

Iceland should be able to bring inflation down if businesses, the government and municipalities hold back on price rises, Finnbjörn Hermannsson, president of the Icelandic Confederation of Labour (ASÍ), told mbl.is. He said he was reasonably satisfied with the outcome of the wage negotiations, provided stability is maintained and there is no external pressure.

If the effort to curb inflation fails, negotiations will be harder when the agreements expire around the turn of 2027-28, he said.

Hermannsson welcomed the government’s plans for the affordable housing system. A bill to be presented during the autumn parliamentary session would allow the state temporarily to finance municipalities’ initial contributions to affordable housing construction, which he said could support nearly 400 homes. He also welcomed plans to put child benefit adjustments on a more stable footing, give workers an individual right to claim penalties for unpaid minimum contractual terms, and introduce chain liability for larger construction projects.

“We are now securing several measures that will remain in place in the future and matter greatly to workers in the country,” he said.

Asked about disagreements within the Broad Coalition, particularly between the heads of Efling and VR, Hermannsson said there were two factions within ASÍ with different aims and that the union leaders found it difficult to work together. The differences had affected the confederation’s work, he said, although the groups were pursuing broadly similar goals.

Bjarni Benediktsson, managing director of the employers’ association SA, said the organisation had made clear there was no room in the negotiations for additional spending, either through wage rises or other costs. That led to discussions about possibly shortening the agreements, with the other parties choosing different approaches. He said those involved were all somewhat dissatisfied, which he described as a feature of the best agreements.

“Although we have got through this breakdown in assumptions, a substantial task remains: improving the competitiveness of Icelandic businesses,” Bjarni said. The measures announced that day gave him some hope that the parties would work together over the winter to restrain price increases. If successful, he said, that could raise expectations of lower interest rates, which had placed a heavy burden on households and businesses.

Under a declaration with the government, ASÍ and SA, municipalities have pledged to keep increases in their charges below 2.5%. Almar Guðmundsson, chair of the Association of Local Authorities in Iceland, said the association had a clear mandate from its national congress. Municipalities would now take the declaration into account as they completed their budgets and set charges, he said.