Wages Have Risen too Sharply, Finance Minister Observes

Prime Minister Bjarni Benediktsson

Bjarni Benediktsson, the Minister of Finance and Economic Affairs, believes there are indications that many Icelandic companies are struggling to deal with negotiated wage increases. The interest rates should have been kept higher for longer, he told Morgunblaðið on Wednesday.

A sense of uncertainty

In an interview with Morgunblaðið on Wednesday, Bjarni Benediktsson, the Minister of Finance and Economic Affairs, expressed his concern for wage increases in the labour market:

“I think there is reason to be concerned when companies that have been doing well start to show losses and when wage rates have risen significantly. There have been indications in some financial statements that companies are struggling to cope with the negotiated wage increases.”

“This is unmistakably the case,” Bjarni continued, “and now we need to find some balance again. We need to read the situation and act as necessary. We have emphasised regaining balance in fiscal affairs, supporting the reduction of inflation and protecting vulnerable groups from the effects of inflation while it lasts,” Bjarni observed, noting that there was a sense of uncertainty within the economy.

“It has to be said that there is a certain amount of uncertainty. We see it, for example, in the Stock Exchange, when we witnessed the third biggest stock market drop in a single day since 2009. These are big events. They reflect insecurity and uncertainty, a certain sense of fear and a kind of reset. Things are being reconfigured,” Bjarni remarked.

BSRB strikes ongoing

As noted earlier this week, 1,000 workers belonging to the BSRB union – Iceland’s largest federation of public sector unions, comprising 19 labour unions with some 23,000 members – went on strike as part of BSRB’s ongoing negotiations with the Icelandic Association of Local Authorities (SNS).

The strike actions affect, among others, staff in sports and primary schools in Kópavogur and Mosfellsbær, after-school programs in Mosfellsbær, preschools in Garðabær, and Seltjarnarnes primary school:

Sonja Ýr Þorbergsdóttir, Chair of BSRB, stated that the Icelandic Association of Local Authorities must pay the same wages to BSRB union members as others in similar jobs. BSRB is demanding retroactive wage increases from January 1, when the last collective agreement was still in effect. The negotiating committee has offered wage increases from April 1st.

On Tuesday, BSRB released a statement emphasising that strike actions were planned for next week, extending to sports programmes and primary schools in Hafnarfjörður, Hveragerði, Árborg, Ölfus, and the Westman islands: “Further strike actions are being prepared in light of the fact that there is no progress in the negotiations.”

“The municipal staff have had enough of this injustice – and they want to take further action. Justice is, of course, workers receiving the same salary for the same jobs. Raising the minimum wage is long overdue so that people in essential jobs can make ends meet,” Sonja Ýr observed.

Funding for Municipal Services for People with Disabilities to Increase by ISK 5 Billion

Alþingi Icelandic parliament

Local municipalities will now receive a permanent increase in funding for legally required services for people with disabilities. RÚV reports that this increase will amount to ISK 5 billion [$35.028 million; €33.043 million] a year.

Per an announcement on the government’s website, the agreement was c0signed by the chair and executive director of the Association of Local Authorities and the Ministers of Finance and Economic Affairs, Infrastructure, and Social Affairs and the Labour Market on Saturday. It is aimed at helping local municipalities “achieve established performance and debt targets according to the current financial plan for the years 2023 – 2027.”

Under the terms of the agreement, local taxes will increase by .22% against a corresponding reduction of state income tax. The tax burden on individuals will not change, however. Rather, the agreement deals with the specific transfer of funds from the state to local municipalities.

Local municipalities have long called for increased funds to provide services for people with disabilities and are still calling for higher contributions. Per Saturday’s agreement, both local authorities and the three undersigning ministries agree to conduct expense analyses for services provided with the aim of renegotiating the agreement next year.

Highest Paid Rural Mayors Earn More than Prime Minister

A recent round-up of mayoral and council manager salaries in rural municipalities is raising eyebrows in some quarters, RÚV reports. Per data first published in Viðskiptablaðið and analysed by Vísir, nine of the highest-paid rural mayors and/or district managers earn higher monthly salaries than Prime Minister Katrín Jakobsdóttir; 11 earn more than Reykjavík mayor Dagur B. Eggertsson.

Gunnar Einarsson is Iceland’s highest-paid mayor and earns ISK 2.6 million [$20,787; €18,772] a month for overseeing Garðabær, a capital-area town with 16,299 residents. The second-highest salary—or ISK 2.3 million [$18,393; € 16,611] a month—is earned by Gunnar Birgisson, mayor of the North Iceland municipality of Fjallabyggð, which is home to around 2,000 people spread amongst the villages of Siglufjörður and Ólafsfjörður. As a bracing point of comparison, both of these men are paid more than London mayor Sadiq Khan, who earns ISK 1.8 million [$14,392; € 12,999] a month for overseeing a city of nine million people.

The top five highest-earning public officials are based in Garðabær (pop. 16,299), Fjallabyggð (pop. 2,007), Ölfus (pop. 2,153), Bláskógabyggð (pop. 1,121), and Akranes (pop. 7,411). Three of the 15 highest-paid public officials are women. The top eleven earners make higher monthly salaries than Reykjavík mayor Dagur B. Eggertsson, who is paid ISK 1.9 million [$15,192; €13,716] for overseeing a city of 128,793 people.

Prime Minister Katrín Jakobsdóttir has criticized soaring salaries for public officials, while Minister of Finance Bjarni Benediktsson counters that the most important thing is transparency and that elected officials can provide justifications for why they are being paid the salaries they are.

“I don’t think it’s a good idea to start trying to centralise these [salaries],” Bjarni remarked. “We call on the responsibility of the municipalities when it comes to wage trends. We have been trying to set limits in the government and parliament because we need to answer for wage trends in the government vis-à-vis the labour market; we don’t want there to be any separation there. But local government[s] must take part in controlling wage creep at the highest level,” he said.

Bjarni did concede, however, that elected officials being at the top of the wage bracket didn’t make sense, “or having higher salaries than comparable responsibility would call for on the open market—it’s the open market that must guide this,” he concluded.

Lilja Alfreðsdóttir is Government’s Most Popular Minister

Lilja Alfreðsdóttir is one of the people nominated for Person of the Year.

A new survey has found that Lilja Alfreðsdóttir, Minister of Education, Science and Culture, is Iceland’s most popular cabinet minister. Stundin notes that no other minister comes close to Lilja’s rating: 67.6% approval, 9.6% disapproval.

Among her recent initiatives, Lilja has proposed the introduction of a bill outlining measures against sexual harassment in sports and youth groups, has suggested a restructuring of the Icelandic school system, and has introduced paid internships for student teachers.

The next most popular minister, with 43.2% approval and 19% disapproval, is Þórdís Kolbrún R. Gylfadóttir, the Minister of Tourism, Industry and Innovation who also temporarily serving as Minister of Justice. Þórdís Kolbrún took over as Minister of Justice in March, when Sigríður Á. Andersen resigned from the position after the European Court of Human Rights ruled that her appointments to the Court of Appeal had been unlawful and impeded individuals’ rights to a fair trial. The survey was taken shortly after Sigríður resigned and so it perhaps comes as no surprise that she was found to be respondents’ least favorite minister, with an approval rating of 13.8% and a disapproval rating of 65.8%.

Bjarni Benediktsson, the Minister of Finance and Economic Affairs has the next highest disapproval rating, 51.6%, although he still has an approval rating of 25%.

Prime Minister Katrín Jakobsdóttir had a fairly even approval to disapproval rating: 38.6% said they were happy with her performance; 34.4% said they were dissatisfied.

The survey was conducted by Maskína from March 15 to 27. There were 848 respondents.



Supreme Court Rules in Favour of Press

Iceland’s Supreme Court has ruled entirely in favour of news outlet Stundin and media company Reykjavík Media in a media injunction case that has been ongoing since October 2017. Kjarninn reports that on Friday, the Supreme Court rejected all claims made by Glitnir HoldCo Ltd, the corporation that oversees the remaining assets of Glitnir bank. The first of these claims was that the journalists involved in the case should be legally compelled to share evidence that might have bearing on it, even if they might, in the course of their testimony, inadvertently reveal information about confidential sources. The company’s secondary claim was that the information reported on by Stundin and Reykjavík Media—information that was obtained from leaked bank documents—should be protected by bank confidentiality.

Friday’s ruling did not address the validity of the original injunction, which was struck down by the Court of Appeals, or Landsréttur, in October 2018. At the time, Landsréttur ruled that Stundin did not have to give up the Glitnir files. It also found that further reporting from the files couldn’t be forbidden. In its ruling, Landsréttur stated that Stundin’s coverage had focused on the business dealings of then prime minister and current Minister of Finance Bjarni Benediktsson, as well as people connected to him, and that this information was undeniably important to the public, especially leading up to elections. It was Glitnir HoldCo Ltd’s contention that the files could be used to report on individuals’ financial affairs which were not matters of public import, a claim that Landsréttur rejected. In that Glitnir HoldCo Ltd appealed Landsréttur’s decision to the Supreme Court, however, the injunction has remained in place since.

Protection of sources is of the highest importance

When the Supreme Court agreed to take the case in November 2018, it did so with the understanding that it would not be reviewing the validity of the initial media injunction, but rather the validity of Glitnir HoldCo Ltd’s assertion that Stundin and Reykjavík Media should not be allowed to use the information found in the leaked files in their reportage and should turn the Glitnir files back over to the holding company. Glitnir HoldCo Ltd’s claims were based on their belief that the data in the files should be protected by bank confidentiality.

The Supreme Court rejected all of the company’s claims. The main of these was that both the District Court and Landsréttur were wrong not to compel three known witnesses, all journalists for the media outlets, to answer questions related to the existence, content, and custody of the leaked bank documents. The company maintained that the courts’ decision not to do this stripped it of its legitimate right to evidence—namely, how the documents were leaked to the media in the first place. The company claimed that being denied this evidence was grounds for automatic dismissal of the first District Court case.

The Supreme Court rejected this claim, stating that compelling the journalists to testify put their source(s) at risk, since there was a significant likeliness that during such testimony, journalists would inadvertently share the names of, or information about, their source(s). With its ruling, then, the Supreme Court determined that the importance of protecting sources takes precedence in such cases.

Public figures necessarily have less right to privacy

On the matter of bank confidentiality, the Supreme Court found it significant that the original injunction was levied on October 16, 2017—just 12 days before parliamentary elections—which made it all the more important that media coverage related to elected officials should not be any more restricted than was absolutely necessary. It noted, however, that the outlets’ coverage was primarily related to the former prime minister’s dealings with Glitnir bank in the lead up to the failure of the Icelandic banks in 2008 and that the tenor and focus of the coverage has largely been the same from the beginning, even after the injunction went into effect.

In its judgement, the Supreme Court noted that is generally understood that individuals involved in public offices have less claim to privacy and confidentiality than private citizens. The role of the media in a democratic society must be considered in such cases, it continued, as must the relevance of the topics and dealings that were under discussion in this instance. “In light of the enormous overall impact that the banking collapse had on Icelandic society, it’s only natural that a reckoning like this would be conducted in the media and the public discussion that usually follows,” read the judgement. The business dealings of former prime minister Bjarni Benediktsson fall within the purview of open public debate, concluded the Supreme Court. Moreover, the business dealings of people close to Bjarni are also open to public discussion, as they are “so interwoven with” those of Bjarni’s that “they should not be separated.”

Finally, the court found that prior to the injunction, all media coverage of parties whose connection to Bjarni Benediktsson was not clear “immediately” was focused on parties who were publicly prominent in the run-up to, and wake of, the 2008 banking collapse and who, therefore, enjoy less privacy and confidentiality than the average private citizen. This was further evidenced by the fact that the media outlets’ coverage of these parties and their part in the 2008 banking collapse has not needed to be adjusted in any meaningful way following the injunction.

The damage is “irreversible”

 Although today’s Supreme Court ruling was in the media’s favour, however, Stundin editors Ingibjörg Dögg Kjartansdóttir and Jón Trausti Reynisson and Reykjavík Media Editor-in-Chief Jóhannes Kr. Kristjánsson expressed dismay at the fact that although “Freedom Has Won,” in the end, the effect of the 522-day media injunction still had what they consider to be a seriously deleterious effect on public discourse. For one, it “…without a doubt, had a deterrent effect on people in our society who hold information or data that has significant relevance to the public, people who want to come to the media in the name of justice,” they wrote in a public statement on Facebook.  They continued by saying that the possible legal costs associated with losing a case like this are not enough to deter unlawful injunctions from being made about topics that are of vital public importance. Regardless of the outcome of the case, they concluded, “[t]he fact remains that there has been a violation of the public’s right to information and when you really think about it, the right to free elections.”

Ingibjörg Dögg repeated this sentiment in an interview with RÚV, wherein she said that although she and her publication felt a sense victory with the ruling, the entire situation remained “incredibly sad.” Given the relevance of the information that was being published had to the 2017 elections, the damage that this injunction did is irreversible.

Bank CEO Salaries to be Reduced

currency iceland

The salaries of the CEOs of both Landsbankinn and Íslandsbanki will be reduced in accordance with a formal request from the Minister for Finance and Economic Affairs, Kjarninn reports. The decision comes in the wake of considerable criticism from both sides of the political spectrum, with critics variously characterizing the salaries of Landsbankinn CEO Lilja Björk Einarsdóttir and Íslandsbanki CEO Birna Einarsdóttir as “excessive” and “tone deaf” in light of ongoing wage disputes for some of Iceland’s lowest-paid workers. Up until now, however, the CEOs’ salaries had been defended by the board of directors for both banks.

This decision was announced in a letter written by Lárus Blöndal, the Chairman of the Board of the Icelandic State Financial Investments office (ISFI), which “manages the state’s holdings in financial undertakings,” and ISFI director Jón Gunnar Gunnarsson.

As previously reported, Landsbankinn CEO Lilja Björk Einarsdóttir received significant pay raises twice in one year. She received her first raise of ISK 1.2 million [$10,045; €8,831] in July 2017, and then another increase of ISK 550,000 [$4,604; €4,047] in early 2018, making her total salary ISK 3.8 million [$31,809; €27,966] a month. Meanwhile, as of January 2017, Íslandsbanki CEO Birna Einarsdóttir was making ISK 4.2 million [$35,162; €30,912] a month, on top of which she also received ISK 200,000 [$1,674; €1,472] in perks and additional benefits.

RÚV reports that per the reductions, the board of Íslandsbanki decided to lower Birna Einarsdóttir’s salary, after which, the board of Landsbankinn decided to follow suit. As of April 1, Íslandsbanki’s Birna will receive ISK 3.65 million [$30,906; €27,338], before additional benefits and perks; ISK 3.85 million [$32,599; €28,836] after. Meanwhile, one of Lilja Björk’s pay raises will be reversed, bringing her monthly salary down to ISK 3.3 million [$27,942; €24,716], before additional perks and benefits; her final monthly salary, including benefits, will be ISK 3.5 million [$29,635; €26,214].

The Icelandic government owns 100% of Íslandsbanki and 98.2% of Landsbankinn.

Minister of Finance Calls for Immediate Review of Bank CEO Salaries

Bjarni Benediktsson

Minister of Finance and Economic Affairs Bjarni Benediktsson has requested an immediate review of CEO salaries at state-owned banks, Kjarninn reports. In a letter sent to the office of Icelandic State Financial Investments (BR) on Thursday, Bjarni stated that the decision of Landsbankinn and Íslandsbanki to raise their CEOs’ salaries “has already had a considerably negative impact on their reputations…as well as sending unacceptable messages” to those union members—specifically hotel cleaning staff—currently involved in ongoing wage disputes.

Bank CEO salaries have come under fire from many quarters after it was learned that Landsbankinn CEO Lilja Björk Einarsdóttir received significant pay raises twice in one year. She received her first raise of ISK 1.2 million [$10,045; €8,831] in July 2017, and then another increase of ISK 550,000 [$4,604; €4,047] in early 2018, making her total salary ISK 3.8 million [$31,809; €27,966] a month. Meanwhile, as of January 2017, Íslandsbanki CEO Birna Einarsdóttir was making ISK 4.2 million [$35,162; €30,912] a month, on top of which she also received ISK 200,000 [$1,674; €1,472] in perks and additional benefits.

In response, Már Guðmundsson, governor of the Central Bank of Iceland, warned against excessive pay raises in a recent video, saying they would inevitably lead to increased interest rates and unemployment in the country. The Confederation of Icelandic Enterprise (SA) also weighed in, with director Halldór Benjamín calling the Landsbankinn bank council’s decision to raise Lilja Björk’s pay twice in one year “tone deaf.”

In his letter to BR, Bjarni stated that this current state of affairs requires “…a prompt review of salary decisions and preparation for changes in current wage policies, which will be submitted at the upcoming general meeting of the banks.” The letter continues by saying that the banks have not respected the state’s requests as far back as January 2017 that restraint and prudence be exercised in respect to all salary decisions.

Both Landsbankinn and Íslandsbanki’s board of directors have responded on their salary decisions in recent weeks. In a letter published on their website, Landsbankinn’s board noted that the criticism they’d received was “understandable,” given that they are owned by the state, but that the decision to raise Lilja Björk’s salary twice was due to the fact that “it was clear that [her salary] was lower than that of the highest executives at other large financial institutions.” They asserted that their CEO salaries had been much lower than those of their counterparts for “many years,” and thus the recent wages were more about establishing wage parity. In its own letter, Íslandsbanki noted that Birna’s salary has decreased ISK 600,000 [$5,025; €4,414] since 2016, but commended her abilities as a CEO, calling her a “strong leader” and similarly stating that the bank’s wage policy requires that CEO salaries be competitive with those of other banks.

Bjarni stated that both banks’ interpretation of the standards for salary increases is “narrow and one-sided” and hasn’t been put into the necessary context. “Trust and confidence must be able to prevail between those who’ve been entrusted with the management of important corporations and those authorities who are responsible for their management as owners.”

This current letter is Bjarni’s second on the matter; he first sent a letter to the two banks about their salary decisions on February 12.

Unions Express ‘Anger and Disappointment’ Over Government’s Newly Proposed Tax Plan

Last night, Minister of Finance and Economic Affairs Bjarni Benediktsson presented the government’s proposals regarding tax and wage issues that have been under negation with four of Iceland’s labour unions and the Confederation of Icelandic Enterprise (SA). RÚV reports that while Bjarni laid out the proposals for the public during a live new conference on Tuesday evening, earlier that day, he had presented these to the unions in a private meeting. The union chairs were, however, unimpressed by the government’s proposals: “It was hoped that the government’s involvement could rekindle the discussion,” read a statement co-signed by the chairs of each union. “But it’s clear from the government’s proposals that this hope will come to nothing.”

The government’s contribution to the debate involved a significant change to the Icelandic tax system wherein the lowest tax level would be newly set at a monthly wage of ISK 325,000 [$2,718; €2,395] a month. The taxation on this level would be 32.94%.  The tax-free limit would be set at ISK 159.174 a month, taking into account a 4% pension contribution.

Bjarni’s presentation explained that the limit for both the first and second tax levels would be ISK 325,000 in order to maximize, he said, the benefits for low-income groups, as well as people with disabilities and the elderly. Per the second level, however, those who earn less than ISK 927,087 [$7,746; €6,830] a month would be taxed at 36.94% while those who make more than that would be taxed at 46.24%.

Bjarni said that on average, taxes would go down more for women than men, and also among individuals aged 18-24. The proposal anticipates a ISK 3.6 billion [$30.1 million; €26.5 million]. In addition, the proposal asserts that the following groups will also benefit from the tax level adjustment: people aged 25 – 34, people with disabilities, the elderly, people who do not own a home, people who receive special housing benefits.

The total impact of the changes to the taxation system would amount to ISK 14.7 billion [$120.4 million; €106.1 million].

Per the unions’ co-signed statement which was issued in advance of the press conference, the chairs of the four unions—VR, Efling, VLFA and VLFGrv—responded to the government’s proposals “ …with anger and disappointment.”

“Negotiations have been in a critical position after the SA business association made an offer last week which would have led to reduced purchasing power for large groups of workers,” read the statement. “The SA in turn rejected a fair counteroffer by the four unions.” The unions plan to hold internal meetings about the issue over the next few days and will then meet with SA again in the company of a state mediator.

“The four unions stand united and steadfast in their demand that workers should be able to live off their wages,” closed the statement, asserting “that the government should make long overdue systemic changes in the direction of justice.”

Bjarni’s Power Point presentation can be accessed in full (in Icelandic) here.

Read an English translation of the union chairs’ statement, here.