Sigurdur Jónsson, manager of the Federation of Trade and Services, said yesterday that Prime Minister Geir H. Haarde had promised more than he could deliver when he said food prices in Iceland would be lowered by 16 percent.
Last year Haarde declared that the value-added tax (VAT) of food products would be reduced as of March 1 2007, resulting in an up to 16 percent price cut in groceries so that food prices in Iceland would be comparable to that in the other Nordic countries. Fréttabladid reports.
Jónsson described Haarde’s statement as “foggy.” He pointed out that according to new calculations by the Ministry of Finance, prices of groceries will actually drop by only 10.6 percent, not 16 percent as the prime minister had stated.
According to an assessment by the Federation of Trade and Services, food prices will be reduced even less. Jónsson believes that only 70 percent of food products will be reduced in price, and only by nine to ten percent.
Jónsson further criticized the prime minister’s statement that dairy products will be lowered in price. What Haarde meant, Jónsson said, is that the price of dairy products will not increase, but not drop either.
Ragnheidur E. Árnadóttir, political assistant to the prime minister, told Fréttabladid that the economic term of a price of something remaining the same is “factual reduction” and therefore Haarde cannot be criticized for saying the price of dairy products will be lowered.
Árnadóttir said Jónsson’s criticism of Haarde’s statement that food prices will be reduced by up to 16 percent had been answered in a letter to the representative of consumers before Christmas.
The letter states that the price of groceries will be lowered by “roughly ten percent,” which in Árnadóttir’s opinion, could refer to 16 percent.