Landsvirkjun Restrictions to Last Longer than Expected

Landsvirkjun, the National Power Company of Iceland, has had to restrict power supplied to industrial production companies to a greater degree than expected, RÚV reports.

Though the power company often reduces its production in the winter, poor reservoir conditions have led to a greater than usual reduction in service. The reductions could have an impact in the hundreds of millions of ISK.

Nearly 10% of power

The reduction began shortly before the new year, and now amounts to around 10% of power delivered to industrial production companies.

In a statement to RÚV, Director of Management Valur Ægisson stated that the ongoing restrictions can be chalked up to poor water flow, as water levels in reservoirs have dropped rapidly. He cited that Blöndulón, a reservoir in North Iceland, has never been this low at this time of year.

The restrictions were initially applied to fish processing plants and data centres. However, restrictions were then also applied to industrial plants such as Elkem, Norðurál, and Rio Tinto.

Waiting for spring

Valur stated further to RÚV that the extent of the restriction amounts to tens of gigawatt-hours per month. The average monthly sales of Landsvirkjun are around 1250 gigawatt-hours.

The restrictions could result in considerable lost revenue for Landsvirkjun. “I can’t give an exact figure, but it measures in hundreds of millions,” stated Valur to RÚV.

Like much of the nation, the situation has the energy company waiting on the arrival of spring and the accompanying meltwater.  “That’s essentially what we’re waiting for, for warmer weather, rain, and see the snow melting in the highlands. When that happens, we can turn things around relatively quickly,” Valur stated.

 

 

March Labour Report Shows Slight Decrease in Unemployment

reykjavík construction

The monthly report issued yesterday by the Directorate of Labour shows a slight decrease in March unemployment numbers.

The Directorate of Labour report shows March 2024 unemployment rates sitting at 3.8%, a decrease from February’s rate of 3.9%. In total, the report shows an average of 7,518 unemployed individuals in March 2024.

Differences by gender, region

Of the total unemployed in March 2024, some 4,344 were men, and 3,174 were women.

There were also some regional differences in unemployment. As might be expected, unemployment rates were higher on the Reykjanes peninsula, the area affected by the ongoing eruptions near Grindavík. Unemployment on the Reykjanes peninsula was recorded at 6.5% for March 2024, a slight decrease from 6.9% in February.

Unemployment rates generally went down for the entire nation except in the capital region. In the capital region, rates remained stable at 3.8%.

North Iceland saw the lowes rates, at 1.5%, and the next-lowest rates were recorded in East and West Iceland, around 2.7%.

Other figures from the report

A total of 283 new jobs were advertised in March through the Public Employment Service.

In March, 81 individuals received recruitment subsidies within companies or institutions, and eight individuals received start-up subsidies.

In March 2024, the Public Employment Service issued 142 work permits to foreign nationals to work in Iceland, 110 of which were in the capital area.

 

 

 

Easter Egg Price Wars Result in Modest Discounts

A broken Icelandic easter egg and the candy inside it.

The price of Easter eggs has gone down in the last couple of weeks as stores compete with pricing strategies. The cheapest chocolate treats can be found in Bónus, Extra and Krónan, while the most expensive eggs are in 10-11, Iceland and Krambúðin, Vísir reports.

In Iceland, Easter eggs are topped with a figurine, most often a yellow chick, and filled with candy along with a piece of paper with a proverb written on it. They are a ubiquitous part of Easter festivities among Icelandic families.

Big difference between stores

The Icelandic Confederation of Labour (ASI) has reviewed the prices of Easter eggs and found that the lowest prices have gone done by a few percentage points. On March 8, Heimkaup lowered their prices, with Extra, Bónus and Króna following suit.

The three stores where prices remain unusually high are 10-11, where the Easter eggs cost on average a whopping 40% more than the lowest prices, and Iceland and Krambúðin with a 38% and 37% deviation respectively. The biggest difference was on the price of a small “lava egg” from candy company Góa, which cost ISK 140 [$1, €0.90] in Krónan, but ISK 249 [$1.81, €1.70] in 10-11.

Bónus leads the way

Bónus consistently had the lowest prices, according to ASI’s review. Of the 34 Easter eggs under review in Bónus, the store sold 28 of them at the lowest price. Extra sold 34 of their 48 eggs at the lowest price, while Heimkaup sold 32 of the 46 eggs reviewed at the lowest price.

Grindavík Exodus Heats Up Housing Market

grindavík evacuation

The housing market showed signs of heating up in February, according to a new report from the Housing and Construction Authority (HMS). The biggest change was in the vicinity of the capital area, which HMS attributes to the residents of Grindavík entering the market to buy new homes, RÚV reports.

Grindavík was evacuated in November due to seismic activity. The town has seen four volcanic eruptions just to the north, in the Sundhnúkagígar area, since December. Three houses were destroyed in the January eruption and the Government has since promised to buy homes from Grindavík residents if they choose.

Prices rise and activity increases

According to HMS, an uptick in the housing price index and data on real estate listings show increased activity in the market. More than 1,400 listings were removed in February, indicating completed sales, which is double compared to January. Reykjanesbær, a municipality near Grindavík, saw the number of completed real estate purchase agreements triple compared to January.

The housing price index rose by 1.9% between January and February and has risen by 5.7% in the last year. Outside of the capital area, the bump was 6.4% between January and February and 8.5% in the last year. HMS attributes this to activity from Grindavík residents in municipalities such as Reykjanesbær.

More Icelanders Seek Help of Financial Advisers Than Before

Finances in Iceland

More people in Iceland seek the help of financial advisors than before, RÚV reports today. The number of couples experiencing financial difficulties is especially increasing. Ásta Sigrún Helgadóttir from the organisation Debtors’ Ombudsman (Umboðsmaður skuldara) blames high-interest rates and inflation for the current difficult financial situations of many residents. 

Inflation fuels difficult financial situations

The Debtors’ Ombudsman is a governmental institution founded in 2010 in the aftermath of the financial crisis. It operates under the guidance of the Minister of Social Affairs and focuses on improving and protecting the position of individuals in debt.

Currently, the head of the institution, Ásta Sigrún Helgadóttir, is witnessing an increase in applications for financial advice. In the December report of the Central Bank’s Financial Stability Committee, it was stated that arrears (part of a debt that is overdue) have not increased significantly despite increased inflation, higher interest rates and a heavier debt burden. Currently, inflation in Iceland stands at 6.6%, the lowest rate since February 2022.

More relief for debtors coming in April

Ásta emphasises that a lot of additional financial issues can be hidden from those reports, such as overdrafts and consumer loans. According to the institution, the socio-demographic group of the applicants is also changing. Until last year, the majority of applicants seeking help were individuals, while currently, an increased amount of couples also seek financial advise. This year, the majority of applicants are employed and on the rental market, though the amount of homeowners seeking aid also increased over the years. 

Changes in the Payment Adjustment Act will take effect on April 1. These modifications, which have just been approved by the Icelandic Parliament, will make payment relief for debtors clearer and more efficient. 

The changes include that more people will be able to apply for payment relief through the Debtor’s Ombudsman. Additionally, new rules regarding payment deadlines will be installed, and temporarily lower monthly mortgage payments will be made possible. People with student loans who were initially exempt from the Act are now also covered.

Collective Agreement Signed, Avoiding Strike and Lockout

VR Union. VR Chairman Ragnar Þór Ingólfsson and SA CEO Sigríður Margrét Oddsdóttir shake on the new collective agreement, March 2024

VR Union and the Confederation of Icelandic Enterprise (SA) signed a four-year collective agreement just after midnight last night, RÚV reports. The airport workers’ strike proposed by VR Union and the lockout proposed by SA have therefore been called off. VR Union’s chair Ragnar Þór Ingólfsson stated that the agreement is acceptable given the circumstances, but that the matter is not over yet.

“It’s been a long and hard period for us and it’s very gratifying that we’ve gotten this long-term collective agreement,” stated Sigríður Margrét Oddsdóttir, CEO of SA. The two parties signed an agreement based on a proposal submitted by the State Mediator yesterday. “The mediator submitted an internal proposal that was based on a certain special wage agreement resulting from the main wage agreement that we were finalising and which the negotiating committees of both parties agreed to,” Sigríður added.

Shift changes for airport workers

She stated that the wage hikes for VR Union members are the same as those that have been agreed on with other unions. They include a general percentage-based increase of 3.25% this year and 3.5% for the next three years.

Ragnar stated that the agreement includes an article on changing the shift schedule for Keflavík Airport workers, the group that had been set to strike later this month if an agreement had not been reached. Changes to the group’s shift schedule are to be agreed on by December 20 with the help of the State Mediator.

Last major signing in a series of negotiations

The collective agreement between VR and SA was the last of a series of collective agreements being negotiated on the Icelandic labour market for the coming years. VR Union also signed a collective agreement this morning with the Icelandic Federation of Trade (Félag atvinnurekenda) with terms similar to those of their agreement with SA.

Governor Optimistic About Iceland’s Economy After Wage Deals

Central Bank Ásgeir Jónsson seðlabankastjóri

The recent wage agreements reflect a unified effort, with all parties seemingly unified towards a common goal, the governor of the Central Bank told RÚV this morning. He anticipates a decline in inflation, potentially setting the stage for lower interest rates.

Uncertainty regarding global economic outlooks

This morning, the Central Bank’s Financial Stability Committee presented its semi-annual Financial Stability Report, which, as noted by the Central Bank’s website, presents “an overview of the position of the financial system, its strengths and potential weaknesses, and the macroeconomic and operational risks it may face.”

This newest report indicates, among other things, that interest rates may have peaked in light of the tightening of monetary policy over recent months. There remains, however, significant uncertainty regarding global economic outlooks, not least because of the armed conflicts in Gaza and Ukraine. Furthermore, there has been a slowdown in the growth of the Icelandic tourism sector, with signs that tourists are staying in the country for shorter periods and spending less. The geological unrest on the Reykjanes Peninsula has also had negative effects. Nonetheless, the position of the major commercial banks is strong, and their capital ratios are healthy.

“Headed in the right direction”

In an interview with RÚV this morning, Ásgeir Jónsson, the governor of the Central Bank, stated that things were headed in the right direction:

“In my mind, everything is moving in the right direction. There has been significant economic growth; the Icelandic economy has grown by 20% over three years, from 2021 to 2023, which is a tremendous growth rate. Our goal at the Central Bank in this regard was to keep debt growth low. We wanted to ensure that this boom did not lead to the financial system overreaching or to seeing significant debt accumulation, and we have succeeded,” Ásgeir remarked.

Upbeat about the wage negotiations

As recently reported, collective bargaining agreements have been negotiated with a majority of wage earners in the general market, with the primary goal of reducing inflation and, thereby, interest rates. Ásgeir is sanguine about these agreements:

“I just want to say that these agreements are very positive. We haven’t fully overviewed them yet; they are complex and involve many parties, including the Treasury, and they are not yet concluded. I believe negotiations with the largest union are still pending, as well as various special unions. But the approach has been correct.”

The governor also stated that the agreements proved that everyone was aligned in their efforts, and now it was up to the Central Bank to ensure inflation decreased and the agreements delivered purchasing power to the public. He added that he could not comment on the interest rate as the monetary policy committee was yet to meet; the day of the next interest rate decision is just over a week away. As noted by RÚV, the analysis division of Íslandsbanki Banks predicts a 0.25% point decrease in interest rates, with others having similar expectations. The governor understands these expectations well:

“I understand this well because what we are seeing now is that inflation has decreased – it’s on the right track. The Central Bank predicts it will continue to fall. Likewise, we are seeing the real economy responding, the overheating is cooling down, and a decrease in loan demand. We are witnessing a decline in private consumption, investment, and other things, which suggests that we can start to ease up on the tightening of interest rates.”

Union Votes on Strike, SA Votes on Lockout

vr union iceland, Ragnar Þór Ingólfsson

The Icelandic Confederation of Enterprise (SA) is hoping to put pressure on VR Union to conclude the ongoing collective agreement negotiations by voting on a lockout of VR Union office workers, RÚV reports. If the lockout is approved, it would be at the same time as a proposed strike of VR workers at Keflavík Airport.

Several collective agreements have been signed between SA and unions in Iceland in recent days, but negotiations between SA and VR Union continue to be contentious. VR Union members working for Icelandair’s passenger and loading services at Keflavík Airport are currently voting on a three-day strike between Friday, March 22 and Sunday, March 24. In response, SA has decided to hold a vote among its members on a potential lockout of VR office workers.

Read More: Another Collective Bargaining Agreement Signed

According to Sigríður Margrét Oddsdóttir, the CEO of SA, the purpose of the lockout vote is to put pressure on VR Union to conclude the negotiations on the basis which has already been set by the parties. Voting on both the strike and the lockout will conclude on March 14. SA leaderships has stated that if VR postpones the announced strikes, the lockout will also be postponed.

Billions Lost through Foreign Gambling Websites

currency iceland

Icelanders spend an estimated ISK 20 Billion [$146 Million, €134 Million] on foreign gambling websites every year. This leads to a tax revenue loss of up to ISK 7 Billion [$51 Million, €47 Million], according to the CEO of one of Iceland’s six legal gambling operations.

Addiction a problem

In an interview with Morgunblaðið, Bryndís Hrafnkelsdóttir, CEO of HHÍ, a gambling operation whose proceeds fund the University of Iceland, said that foreign gambling websites like Coolbet, Bet365, and Betsson operate without public oversight and that their proceeds do not benefit Icelandic society.

“Authorities need to take on illegal gambling, which has been allowed to happen in Iceland for too long,” Bryndís said, adding that gambling addiction is a big problem in Iceland, especially among young men. “The problem doesn’t disappear if we introduce harm reduction for addiction and will only increase if nothing is done. The gamblers will find another way and move from legal gambling to the illegal foreign sites which will cause money to stream out of the country instead of going towards good causes domestically.”

Profits for social causes

HHÍ has been operating for 90 years and funds the building and maintenance of the University of Iceland’s campus. Six Icelandic companies have a license for gambling operations in Iceland and their proceeds all go towards social causes, such as education, youth groups or sporting activities.

New Wage Agreement Aims to Stabilise Iceland’s Economy

Sólveig Anna Jónsdóttir

A collective bargaining agreement, effective from 2024 to 2028, aims to lower inflation, reduce interest rates, and ensure stability. The agreement includes significant wage increases, a premium for shift workers, and a government-supported ISK 50 billion ($368 million / €336 million) financial package to aid its implementation.

The “Stability Agreement”

A long-term collective bargaining agreement valid for four years was signed yesterday between a broad coalition of trade unions in the general labour market, the Federation of General and Special Workers (SGS), Efling and Samiðn and the Icelandic Confederation of Labour (ASÍ). The agreement covers tens of thousands in the labour market and is effective from February 1, 2024, to January 31, 2028, RÚV reports.

The main objective of the agreement, referred to by the unions and the Confederation of Iceland Enterprise (SA) as the Stability Agreement (Stöðuleikasamningurinn), is to create conditions for lower inflation, reduced interest rates, and stability.

Minimum wage increases

As noted by RÚV, the agreement aims for wage increases in several stages, raising wages by a minimum of ISK 23,750 ($175 / €160). The increase is retroactive from February 1 of this year by 3.25%. At the start of next year, wages will increase by 3.5% and then again by 3.5% on January 1, 2026, and 2027. The agreement also includes clause regarding a December wage supplement and a holiday bonus, which will increase annually.

Employees in cleaning jobs will receive special wage increases. Due to the special working conditions of cleaning staff, a cleaning supplement of ISK 19,000 ($140 / €128) is paid monthly on the wage scale for a full-time position.

A shift premium will also be paid to shift workers for all work outside of regular working hours until the end of their shift.

Furthermore, changes will be made to the structure of bonus payments for manual labourers in the tourism sector, and it will be possible to agree on different shift premium payments than those stipulated in the collective agreement at the workplace.

Government to support agreement with spending package

As noted by Vísir, the government introduced an ISK 50 billion ($368 million / €336 million) spending package to support the agreement after it was reached. Municipalities will also contribute to the agreement through increased land allocation and free school meals.

In an interview with Vísir yesterday, Heiða Björg Hilmisdóttir, the chairperson of the Icelandic Association of Local Authorities, stated that free school meals were a point of contention for municipalities but that an agreement was reached wherein free school meals would be implemented in collaboration with the government. Despite the agreements including an additional ISK 10 billion ($74 million / €67 million) for municipalities, local authorities do not stand to benefit more than others, Heiða maintained.

Additional measures include increased housing support for parents in rental housing and increased contributions to child benefits, maternity/paternity leave, and housing benefits.