At a press conference yesterday, the government presented the second phase of its economic response package to the COVID-19 crisis. The package is worth an estimated ISK 60 billion ($412,000,000 / €380,000,000) and focuses on support and protections for small enterprises, innovation, and vulnerable groups.
Protect jobs, look to the future
Yesterday, at the Culture House in downtown Reykjavík, Prime Minister Katrín Jakobsdóttir, Finance Minister Bjarni Benediktsson, and Minister of Transport and Local Government Sigurður Ingi Jóhannson introduced the second phase of the government’s economic response package to the COVID-19 crisis. The first phase of the package was introduced on May 21.
“In recent weeks and months, Icelanders have shown solidarity, resilience, and flexibility in the face of this unprecedented pandemic. Today’s announcement reflects our priorities to protect jobs, embrace our people, and look to the future,” Katrín Jakobsdóttir stated.
The package includes, among other things, wage enhancements for healthcare workers; additional contributions to innovation and higher reimbursement for research and development; subsidies to businesses that have been forced to close; support to vulnerable groups, job seekers, and students; and special protections to media companies and travel agencies.
Wage enhancements for healthcare workers
The package will award front-line healthcare workers, who have been “under additional strain and are at elevated risk of contagion,” a one-off bonus in acknowledgement of their service. The bonus is worth an estimated ISK 1 billion ($6,867,690 / €6,325,199). The implementation and allocation of the bonus will be in the hands of healthcare institutions.
The package calls for the prioritisation of innovation, involving additional contributions to companies investing in growth, and the increase of reimbursement ratios and caps on research and development (contributions to the Kría Venture Capital Fund will likewise be increased). The government also aims to expedite reimbursements for research and development expenses in 2019. The measures equal just under ISK 4.4 billion ($30,234,446 / €27,848,948).
Iceland’s food production sector will also receive greater support and funding for the arts will be increased to allow an additional 600 projects to be supported in 2020.
Subsidies to businesses forced to close
The plan will also grant so-called “closure subsidies” of up to ISK 2.4 million ($16,489 / €15,190) to companies forced to halt their operations for health reasons during the pandemic. Non-indexed support loans of up to ISK 6 million ($41,226 / €37,966), offered at the Central Bank of Iceland’s seven-day term deposit rate (1.75%), will also be available to these companies.
The total expenditures for the two measures are estimated at roughly ISK 30 billion ($206,143,950 / €189,890,529). Companies will also be authorised to carry forward up to ISK 20 million ($137,438 / €126,584) in foreseeable year-2020 losses to offset income tax on 2019 profits.
Support for vulnerable groups
The response package includes measures to support vulnerable groups, job seekers, and students. A total of ISK 2.2 billion ($15,115,081 / €13,925,053) will be used to create “3,000 temporary summer jobs for students aged 18 and over.” A total of ISK 300 million ($2,061,147 / €1,898,871) will be used to support “innovation among young entrepreneurs” through the Icelandic Student Innovation Fund. A further ISK 8.5 billion will be allocated to social measures to support “vulnerable groups, work against violence, (to) counteract social isolation among the elderly and disabled, (to) support job-seekers, and (to) ensure that children from low-income families have the opportunity to participate in recreational activities.”
Priority will be given to increased access to mental health services and telemedicine for these groups.
Special protection to media companies and travel agencies
“In order to support pluralism and diversity in Iceland’s media, privately-owned media operations will be guaranteed special operational support during the current year, reflecting their sustained significant losses at a time when demand for their services has increased … travel agencies’ losses will be addressed with statutory amendments authorising them to reimburse certain trips by issuing credit vouchers.”
The government’s plan of action was met with mixed reviews. Ásdís Kristjánsdóttir, Head of Economics at the Confederation of Icelandic Enterprise, stated that the response package would mainly benefit small companies and microenterprises.
“The support loans, which are perhaps the most significant economic measure in the package, will have a positive impact on these companies. But in terms of revenue, the operations of these companies only account for 15% of the business in the economy. This leaves out the other 85% who cannot apply for these loans.”
The Icelandic Confederation of Labour (ASÍ) also expressed its disappointment with the second phase of the government’s response package. In a statement published yesterday on ASÍ’s website, the confederation criticised the government’s focus on companies:
“Once again, the government directs its support not to people but to companies, who according to some vague rules can dig into the public’s pockets for funding, regardless of whether these companies maintain jobs, adhere to wage agreements, or contribute their fair share to society.”
Helga Vala Helgadóttir, MP for the Social Democratic Alliance, worried that the response package was not comprehensive enough.
‘We worry that the response is still too focused on companies, even though it’s important to maintain employment levels. But we certainly fear that enough isn’t being done, in our opinion, to respond to the decline in household income.”