M4.9 Earthquake in Bárðarbunga Caldera Caused by Magma Intrusion

A lake on top of Bárðarbunga on Vatnajökull glacier.

A strong earthquake occurred this morning in Bárðarbungacaldera located on the Vatnajökull glacier. The earthquake measured M4.9 and was felt as far away as Akureyri. Kristín Jónsdóttir, head of the Icelandic Met Office’s Volcanoes, Earthquakes, and Deformation Department, told RÚV the earthquake was caused by a magma intrusion, but there are no indications the magma is on its way up to the surface.

Land rise has been occurring at Bárðarbunga since the end of the Holuhraun eruption in 2015. Kristín says there are no indications the current activity is related to the land rise and melting ice currently occurring at Askja volcano.

There are also no indications an eruption from Bárðarbunga is imminent, Kristín says. “Bárðarbunga could be in this phase, this magma accumulation phase, and then we get these strong quakes at certain intervals, for decades.”

Three Deaths in Swimming Pools in Three Months

A woman in her late forties died in Lágafellslaug swimming pool in the town of Mosfellsbær yesterday, RÚV reports. It was the second death in a capital area pool within one week: a woman in her 80s died in Kópavogslaug swimming pool last Friday. In addition to these two cases, a man was found dead in a hot tub in Breiðholtslaug in Reykjavík last December. A swimming safety expert says it should not be possible for deaths like these to occur in capital area swimming pools.

Paramedics were called to Lágafellslaug pool in the capital area municipality of Mosfellsbær yesterday when a woman was found unconscious. The woman was taken to the hospital where she was pronounced dead. Detective Superintendent Margeir Sveinsson says the case is under investigation, as other cases of deaths that occur in swimming pools.

Police continue to investigate the death that occurred in Breiðholtslaug pool last December. The victim was in his 70s and physically disabled, and he had likely been unconscious for around three minutes before he was discovered by another patron. Hafþór B. Guðmundsson, a former lecturer in sports science at the University of Iceland and an expert in swimming safety, was interviewed by RÚV last December following the death in Breiðholtslaug. He called for action on safety issues in Icelandic swimming pools.

Night Bus Service Returns to Reykjavík

The City of Reykjavík has signed an agreement with Strætó public bus service to begin operating night buses within the city as of February 24. Night buses from downtown Reykjavík were previously implemented as a pilot project but their operation ceased during the COVID-19 pandemic when overall ridership declined.

Four night routes will run from the city centre to the neighbourhoods of Breiðholt, Úlfarsárdalur, Norðlingaholt, and Grafarvogur on Friday and Saturday nights. The buses will only transport passengers away from the city centre, not towards it. Buses will leave the city centre at a specific time but will not be time-adjusted along the route, so travellers are encouraged to monitor the buses’ real-time location in the Klapp app or on straeto.is.

A single night bus fare will be ISK 1.100 [$7.60, €7.15] and specific tickets will be available within the Klapp payment system. Monthly and yearly pass holders can use their passes for night bus services.

Read more about public transport funding in Iceland.

Efling Union Would Not Pay Workers in Potential Lockout

Samningar Verkföll Sátti

The Confederation of Icelandic Enterprise (SA) is currently voting on a lockout that would affect 20,000 Efling employees. Locked-out workers would not be allowed to show up to their usual employment. As such, they would not receive wages, accrue leave, or receive pension payments. Efling chairperson Sólveig Anna Jónsdóttir has stated that Efling would not provide financial support to members in the case of a lockout, which differs from the policies of other large unions in Iceland.

Read More: SA to Vote on Lockout Against Efling

The lockout vote is the latest in a series of escalating moves in the fraught collective agreement negotiations between SA and Efling. The vote ends on Wednesday at 4:00 PM and if the lockout is approved by SA member companies, it will begin on March 2 at noon. While workers would not be collecting wages during a lockout, neither would they receive financial support from Efling, a notice from the union states, as “the union does not hold responsibility for a lockout and the labour dispute fund cannot sustain such payments.”

Other unions pay members in case of lockout

Supreme Court Barrister Lára V. Júlíusdóttir told mbl.is that it has been around 35 years since lockouts have been used as a significant tactic in Icelandic wage negotiations. Lára says that Efling’s decision to not pay out to members affected by a lockout would possibly be disputed. She adds that other large Icelandic unions, including VR and RSÍ, emphasise paying from the labour dispute fund both in the case of strikes (initiated by unions) and lockouts (initiated by employers).

Efing is Iceland’s second-largest union by membership, and a lockout would significantly impact most sectors of the country’s economy. CEO of SA Halldór Benjamín Þorbergsson called the lockout an “absolute emergency measure” intended to put pressure on Efling. The union has called the lockout a “one-sided, coercive measure” intended to “force workers to accept a worse outcome in contract negotiations than otherwise.”

Efling approves further strike

In the meantime, Efling members have voted in favour of further strike action. The strikes would begin on February 28 at noon and would affect some 2,000 workers in security companies, cleaning companies, and hotels.

Kristján Þórður Snæbjarnason, president of The Icelandic Confederation of Labour (ASÍ) stated he would have preferred to see Efling and SA spending more energy on negotiations than strikes and lockouts, but pointed out that the two measures are not comparable in their impact on society.

“Efling’s strikes are intended to affect the position of the contracting parties and put pressure on the businesses. However, they don’t have the same crippling effect on society that lockouts could potentially have. I think SA is on a bit of thin ice if they’re going to resort to these actions.”

Why are the prices so high in Iceland?

Why is Iceland so expensive?

Iceland is relatively expensive compared to many other countries but on the other hand, the average salary is higher than in most other countries. There are several reasons for Iceland’s high prices, including a small market, oligopoly, high reliance on imports, geographical isolation and high import taxes and tolls. Not everything is expensive in Iceland, however, the most notable exception is energy, including electricity, water and geothermal power, which is relatively cheap. That is an advantage for Iceland during the current global energy crisis.

Iceland’s geography means that most goods are imported and products need to be transported on container ships or by air. The small market only has a handful of companies handling imports to Iceland. Two companies take care of most shipping and the air cargo transport industry also has limited competition. The climate doesn’t help, as harsh weather conditions in winter can negatively impact transportation. 

Oligopoly is a wide-ranging issue across sectors. Most Icelandic grocery stores are run by one of two companies, Hagar and Festi with a single location of American Costco as their main competitor. The same two companies own most gas stations and Costco runs one station, which also happens to be the cheapest alternative for car owners. And the list goes on.

Taxes in Iceland are high, including import taxes, and again, it’s due to Iceland’s small market and population. However, the state maintains a strong infrastructure, e.g. a wide-ranging welfare system and an extensive road network. When fewer people shoulder those costs, it means higher taxes per person. The state also levies heavy tolls on imports in order to maintain local production, for environmental, social, and safety reasons. Local production, e.g. food production, does not have the same economies of scale as producers in other countries and therefore cannot keep the prices down to the same level. In order to support local production, protective tariffs are used on imports. These reasons seemed validated e.g. during the Covid pandemic when global supply lines were disrupted.

Iceland’s small population leads to a small market making it less attractive to global companies. A good example is from the global financial crisis in 2008 when the exchange rate of the local currency ISK plummeted. McDonald’s no longer considered Iceland a feasible market to operate in, so they shut down all McDonald’s locations in the country. A side note: Some Icelanders were happy to see the American burger chain leave the country while others missed it immediately, some to the extent that the first thing they do when visiting other countries is to grab a McDonald’s burger. In a similar vein, some Icelanders have regularly complained about the lack of Starbucks, but the café chain has never seen a reason to open a branch in Iceland due to the small size of the market. 

When Costco opened a store in Iceland in 2017, there was great excitement in the air, as Icelanders were only used to local grocery stores like Bónus and Krónan, where the variety is limited compared with other countries and prices are also significantly higher. The hype was so great that a large part of the population joined a Facebook group for sharing photos and prices of products bought in Costco. When this is written, roughly 25% of Iceland’s population are members of the group (97,482 members while the population of Iceland was 387,800 at the end of 2022).

Tourism has raised prices in certain categories, most notably the housing market where the explosion of Airbnb rental availability has limited the supply of housing available for locals to rent and pushed up prices. During the pandemic when tourism dried up in Iceland temporarily, the prices of rental housing unexpectedly went down after several years of steep increases, ever since the tourism boom around 2010. The government has taken initiatives to mitigate the Airbnb effect by setting a maximum of 90 days for short-term rental per year on the same tax level as other housing rentals. If people want to rent their apartments for more than 90 days each year, they’re taxed as if they were a business in the hospitality industry.

Through the years, Iceland has had numerous vicious circles of relatively steep salary increases followed by price increases, inflation and increased interest rates. At the time of writing, we are going up with the rollercoaster, as ongoing labour talks have proven tricky to resolve. Some workers are striking in an effort to get higher wages and the Central Bank just increased the interest rates for the 11th time in less than two years to combat inflation, which will in turn increase interest rates on people’s mortgages and increase the pressure on higher salaries. 

The other side of the coin is that Iceland offers higher salaries and a relatively high purchasing power despite the high cost of living. In times of crises and rapid inflation, locals tend to do what they can to minimise such effects by reverting back to traditions from a time when tough times necessitated a more frugal way of life. For example, when the financial crisis hit in 2008, people started to buy and even make their own slátur (an Icelandic speciality from the innards of sheep, similar to the Scottish haggis). The innards of sheep also increased in popularity as the main ingredients for dinner, e.g. hearts, liver and kidneys. In times of crises, people also tend to buy more wool and the popularity of knitting goes up. Not only are woollen hats, mittens, and sweaters great for keeping out the winter cold, but the knitting itself is a pleasant, relaxing activity. Recipes for a classic fish stew (plokkfiskur) start to appear more frequently, and baking and bringing lunch packs to work or school become commonplace.

For tourists in Iceland, there are various ways to save while enjoying a great trip. For breakfast, you could get ingredients from the low-cost grocery stores such as Bónus (the cheapest supermarket in Iceland) and Krónan instead of more expensive convenience stores , e.g. oats, raisins, skyr, bread, butter, cheese, vegetables, coffee and juice. If you are taking a road trip, you can save time (and have more time to explore the country) by packing lunch to have on the way instead of eating in restaurants. When you want to eat out, these are among the more economical options in Reykjavík:

  • Mandi offers Syrian food like shawarma and falafel and is probably the most popular lunch place in Reykjavík (it has a branch downtown and in Skeifan)
  • The Noodle Station in Reykjavík is also widely popular and offers noodle soup available in three variations: chicken, beef and vegetable, along with a mix of secret ingredients
  • Café Loki downtown Reykjavík offers a nutritious and filling Icelandic lamb meat soup and fish stew with rye bread 
  • Ramen Momo produces organic fresh noodles. Most of the ingredients in their dishes are locally made
  • 101 Reykjavík Street Food specializes in local food as well as international favourites, e.g. fish & chips, Icelandic fish stew and lamb soup (kjötsúpa)

In short

To sum up the points above, these are the main reasons for high prices in Iceland:

  • Geographic isolation
  • Oligopoly with very few companies dominating various sectors
  • High taxes and import tolls
  • Small population, hence a small market
  • Many global companies don’t see the market as feasible (e.g. McDonalds, Burger King and Starbucks)
  • Tourism has increased demand in some sectors and thereby the prices, most notably in housing, with Airbnb rentals 

Despite high consumer prices, salaries are also high, which makes for a relatively high purchasing power in international comparison. Then there are various ways for people to save, including buying food in supermarkets rather than restaurants.

See also our ASK IR on the cost of living in Iceland.