Employment Market Demands Reduction in Policy Rate Skip to content

Employment Market Demands Reduction in Policy Rate

By Iceland Review

President of the Icelandic Confederation of Labor (ASÍ) Gylfi Arnbjörnsson and managing director of the Confederation of Icelandic Employers (SA) Vilhjálmur Egilsson were both quoted this morning saying that a lowering of the Central Bank’s policy rate is essential for them to reach an agreement on wages.

The Central Bank of Iceland. Copyright: Icelandic Photo Agency.

ASÍ and SA are currently in stabilization talks in an effort to reach a so-called “national reconciliation” on wage issues.

Representatives from these unions are in disagreement on when salary increases should take place and say it is impossible to reach a conclusion until the Central Bank lowers the policy rate. The next decision on that matter will be announced on Friday, Fréttabladid reports.

“If a substantial lowering of the policy rate does not take place there is no use talking about salary increases,” Vilhjálmsson said.

“It is clear that all attention is on the Central Bank at the moment,” Arnbjörnsson told Morgunbladid. “We realize that it will be very difficult to reach an agreement with employers on wage issues.”

“It is clear that the position of employers is decided to a large extent by the policy rate development so it is of utmost importance to find a way out of these difficulties in the coming days,” Arnbjörnsson added.

Both Vilhjálmsson and Arnbjörnsson attended a meeting with representatives of the Icelandic government and local authorities yesterday, during which the country’s economic situation was reviewed.

Vilhjálmsson told Fréttabladid that he had emphasized that the national deficit be reduced more rapidly at yesterday’s meeting and suggested that financial budgets be made for three years at a time. He said that the participation of pension funds in the employment market had also been discussed.

Arnbjörnsson told Morgunbladid that ASÍ is interested in continuing to work with the government to find a joint vision for the future. However, the government is not involved in finding a solution to the dispute with SA over salary issues.

“It is naturally not the government’s responsibility to make a decision on the policy rate, others are responsible for that. But I believe that all conditions are in place to reach a conclusion on the matters between us and the government,” Arnbjörnsson said.

Click here to read about the latest policy rate decision.

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