Iceland’s Social Minister Wants to Write off Debts Skip to content

Iceland’s Social Minister Wants to Write off Debts

Minister of Social Affairs Árni Páll Árnason announced last weekend that it is necessary to write off part of the public’s debts to correct the incongruity that occurred during the banking collapse, when debts increased and the value of assets decreased.

“It would naturally be the right thing to do to write off debts that exceed payment ability and what the collateral of assets allows. The value of assets collapsed, while debts increased significantly. Debts in society exceed assets by far and it is not for the good of anyone to maintain that situation. It reduces the ability of the economy to recreate value,” Árnason told Fréttabladid.

Minister of Finance Steingrímur J. Sigfússon said that such measures must be undertaken carefully. “The actions that we take during these difficult circumstances must be straight to the point and systematic and aimed at assisting those who need it the most. And they must be manageable according to the position of the state treasury, the Housing Financing Fund, the pension funds and others.”

Árnason said that the basic condition for writing off debts is that it neither increases the burden of the state treasury nor tax payers. When asked who will pay for such a debt correction, the minister replied:

“We must accept the fact that these are lost claims to a large extent. There is supposed to be a scope within the banking system to take on the loss. When the loans were transferred between the old and new banks, write-offs were taken into account.”

Árnason said a technical implementation of such write-offs must be created that is fair towards everyone. “We also have to be fair towards those who didn’t create any debts—they shouldn’t have to pay for those who are able to pay themselves.”

Two items will determine whether people qualify for write-offs, the minister said, payment ability and collateral flexibility. When asked about ideas of a flat cut on all debts, Árnason replied that “it is not in the picture.”

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