Prime Minister Halldór Ásgrímsson said Iceland’s banks have not slowed their lending as much as he wanted, according to last night’s report on RÚV. He also claimed that the devaluation of Icelandic krona comes at a better time now than if it had happened later this year. It is necessary, he said, to slow down the Icelandic economy by stepping on the brakes.
The Prime Minister was also surprised that housing prices were still rising. Minister of Social Affairs Jón Kristjánsson, a member of Halldór Ásgrímson’s Progressive party, announced that maximum loans by the State Housing Fund would increase from 15.9 millinon ISK to 18 million ISK. Earlier this year the Prime Minister indicated that the fund’s role would be decreasing.
The Prime Minister said he was surprised that the Norwegian Oil Fund had been selling the Icelandic krona short, Morgunbladid reported yesterday morning. “We must protest this action,” he told Morgunbladid, making a reference to an agreement between the Nordic countries. The handlings of the state owned fund were not in accordance with that agreement. The Oil Fund is supervised by the Norwegian Central Bank and Ásgrímsson said that he trusted that the Central Bank would limit the fund’s ability to directly influence the Icelandic economy. However, he said that he would not contact Norwegian authorities “at this stage.”
By selling the krona short the fund bets that the currency will be devalued.