Finance minister Geir H. Haarde says in Morgunblaðið today that the OECD‘s suggestion to reduce the interest rate subsidy for mortgages for home buyers is worth “further consideration”. He cites the structural changes that the Icelandic lending market underwent last year as a reason for re-examining the current rules. Moreover, Geir claims that the subsidy was always only intended for people with low-income or first-time buyers, and that others less-needy are also receiving subsidies under the current rules.
The confederation of Icelandic employers, Samtök Atvinnulífsins, backs the finance minister’s views in a statement on its website, but the president of labor union association ASÍ protested on Icelandic State Radio, RÚV, claiming that reductions in the mortgage subsidies would hurt wage earners.
Associate professor of economics at the University of Iceland, Gylfi Magnússon, is also interviewed in Morgunblaðið today. He says the OECD‘s economic outlook contains “no surprises”. He points out that in addition to monetary policy, run by the central bank, the government’s fiscal policy plays an important part in managing the economy. In his view, the government will doubtless have to respond to the overheating economy by cutting back expenditures.
