Iceland has reached a very delicate juncture according to a new statement by the International Monetary Fund (IMF) published on May 20th.
IMF’s mission to Iceland published its concluding statement after completing a two-week visit, meeting the authorities, members of parliament, private sector and labor market representatives.
The mission’s conclusions are that on one hand “there is a strong desire to reintegrate the economy into international financial markets to harness benefits for savers, investors, and the economy as a whole, against a backdrop of good economic prospects. On the other hand, there is a threat of distributional disagreements among social partners that could undermine the hard-won growth and stability gains since the crisis.”
IMF’s advice is that social partners should work together to reach equitable wage agreements consistent with maintaining stability, competitiveness, and sustainable growth. The mission warns against large wage increases and says that if they will be realized a decisive policy response will be needed to restore stability, including tighter monetary and fiscal policy. “The adverse consequences of such large wage increases, not least on Iceland’s competitiveness, will likely slow the pace of liberalization for the real economy.”
Read more: Plans to lift capital controls to be introduced
Capital controls have been in place in Iceland since the domestic banking system collapsed in 2008. In April Iceland’s government announced that plans to lift capital controls would be introduced before the parliament's summer recess. That target might seem very optimistic or even unrealistic given the current situation of a large part of the nation’s workforce heading for a strike.
Iceland is at a delicate juncture indeed and the deeply unpopular coalition government does not seem to know where it’s heading.
Read more: Estates of the three failed banks could face 35% exit tax
Iceland has reached a very delicate juncture according to a new statement by the International Monetary Fund (IMF) published on May 20th.
IMF’s mission to Iceland published its concluding statement after completing a two-week visit, meeting the authorities, members of parliament, private sector and labor market representatives.
The mission’s conclusions are that on one hand “there is a strong desire to reintegrate the economy into international financial markets to harness benefits for savers, investors, and the economy as a whole, against a backdrop of good economic prospects. On the other hand, there is a threat of distributional disagreements among social partners that could undermine the hard-won growth and stability gains since the crisis.”
IMF’s advice is that social partners should work together to reach equitable wage agreements consistent with maintaining stability, competitiveness, and sustainable growth. The mission warns against large wage increases and says that if they will be realized a decisive policy response will be needed to restore stability, including tighter monetary and fiscal policy. “The adverse consequences of such large wage increases, not least on Iceland’s competitiveness, will likely slow the pace of liberalization for the real economy.”
Read more: Plans to lift capital controls to be introduced
Capital controls have been in place in Iceland since the domestic banking system collapsed in 2008. In April Iceland’s government announced that plans to lift capital controls would be introduced before the parliament's summer recess. That target might seem very optimistic or even unrealistic given the current situation of a large part of the nation’s workforce heading for a strike.
Iceland is at a delicate juncture indeed and the deeply unpopular coalition government does not seem to know where it’s heading.
Read more: Estates of the three failed banks could face 35% exit tax
