The Prime Minister has expressed disappointment in VR’s decision to break off wage negotiations with SA Thursday evening. The Minister of Finance does not believe his comments on the Central Bank’s interest-rate hike were “the deciding factor,” RÚV reports.
Mixed messaging among ministers
This morning, Ragnar Þór Ingólfsson, Chair of VR (the Store and Office Workers’ Union) confirmed to RÚV that he had walked out of negotiations with SA (the Confederation of Icelandic Enterprise) last night, which had recently been referred to the state mediator.
The reasons, Ragnar stated, were “numerous,” although the incongruous messaging of Prime Minister Katrín Jakobsdóttir and Finance Minister Bjarni Benediktson concerning the Central Bank’s interest-rate hikes “played a role.”
Prior to the Central Bank announcing that it would be raising interest rates, VR and SA had been aiming toward an agreement predicated on less inflation and a lower interest rate:
“But then the Central Bank announced a hike, which, in reality, altered the premises from which we had hoped to proceed,” Ragnar Þór told RÚV. “The PM subsequently invited us to a meeting yesterday morning, in which she attempted to reset the parties’ expectations. It was a pretty good meeting.”
Ragnar observed that the parties proceeded to Karphúsið (the facilities of the state negotiator) where they hoped to continue their negotiations at noon.
“We’ve hardly taken our seats when an announcement is made by the Minister of Finance in which he echoes the Governor’s (the Central Bank) message, which is completely at odds with what the PM had told us. After that, the negotiations became quite difficult. And when it became clear the kind of ideas that SA were entertaining regarding a 14-month contract, which we had been discussing, it was obvious that there was no ground to continue negotiating.”
An interest-rate hike of some consequence
Following a cabinet meeting this morning, Katrín Jakobsdóttir discussed Thursday’s wage-negotiation collapse with RÚV. Asked if she had wished that the Central Bank had not raised interest rates, Katrín responded thusly:
“The Central Bank makes its own decisions in accordance with the statutory aims under which it operates. It’s not my place to comment on those decisions, but it is clear that this decision led to the collapse of negotiations.”
“I regret the fact that VR decided that it was appropriate to leave the negotiating table at this time, but I hope that we can find some kind of opening,” Katrín added.
“Best to speak honestly”
This morning, Bjarni Benediktsson was asked to respond to Ragnar Þór’s claim that his comments, justifying the Central Bank’s actions, had been a deciding factor in the collapse of negotiations.
“No, I think it’s always best to be completely honest about things,” Bjarni remarked. “And I just saw an announcement from VR where no mention is made of my comments; it’s likely that the premises had changed following the Central Bank’s decisions, premises which likely were the basis for the parties’ negotiations.”
Bjarni told RÚV that it was clear that inflation would rise and that it was only natural for the Central Bank to employ those tools at its disposal to keep inflation in check:
“But the truth is that the inflation forecasts have worsened, and the ghost of inflation is set to follow us a bit longer, and inflation will be higher next year than we had hoped just a few months ago. The tension in the economy runs high. We’re nearing maximum production capacity and the level of employment is very high. Consumption is high, which is one of the factors to which the Central Bank has pointed. It doesn’t really surprise me that the Central Bank continues to send these clear messages, that it will continue to fight inflation, and it’s desirable that all of us cooperate to do the same.”
VR is Iceland’s largest trade union, representing some 40,000 workers.