Minister of Finance welcomes a conclusion of wage negotiations - Government issues a statement

The Government of Iceland today issued a statement on the occasion of the conclusion of wage negotiations between the social partners. The negotiation have been ongoing for some time but concluded on Thursday afternoon.

The agreement reached between the social partners is imperative to the continuation of the recovery of the Icelandic economy after the collapse in 2008. The Government consider stability in the labour market as essential to creating an environment conducive to economic growth, thereby further securing the pillars of the welfare society.  

The declaration outlines the Government's programme of work and priorities on a policy level as regarding fiscal consolidation as well as on economic and monetary matters. It also specifies numerous specific measures which aim to promote investment and growth:

-    The social partners and the Government jointly commit to bringing investment up by at least 7% of GDP within three years (i.e. to a minimum of 20%).
-    Investment in energy production will be facilitated, on the basis of sustainable resource utilisation.
-    Private sector investments will be encouraged through a number of channels, focusing in particular on energy reliant industry and the export sector.
-    Demand in the economy will be stimulated through investments in public infrastructure and financially viable projects.
-    Legislative amendments will be made to simplify corporate taxation.

The declaration also contains pledges related to the strengthening of the welfare system:
 
-    Social benefits will be adjusted as to reflect general wage-raises, and particular emphasis will be placed on low-income groups.
-    An effort will be made to significantly enhance attainment in education, in particular among young people and the unemployed.
-             Number of students places in secondary education, adult education and tertiary education will be increased already in autumn 2011.
-    Personal tax allowances will follow price changes through indexation.
-    The social partners and the Government will continue work already in progress regarding the reform of the pension system, aiming to create one integrated and entirely self-sustaining pension system for both private market and public pensioners.

Steingrímur J. Sigfússon, Minister of Finance in Iceland, said on the agreement:

 "We welcome the wage agreements – they provide the stable basis we need for advancing further towards economic recovery. It is true, however, that they do put additional strain on the public finances. But we are convinced  that in the medium and longer term we stand to gain from the agreement. We all aim to secure investment in the economy and we believe that now is the right time to invest also in our social infrastructure.  The Government has established an excellent track-record as to our fiscal performance over the last two years where we have brought the budget deficit to numbers which are relatively low in an European comparison, and it is absolutely imperative that we stay on that course. That is what we intend to do."