Iceland rehabilitation pact to be signed today?

iceland-sattelite2Iceland’s stability pact between representatives of employers, the Federation of State and Municipal Employees, the national government and local governments is due to be signed today at 13.00 after long delays and bitter wrangling.

It looked like a deal would not be reached yesterday to please the state and municipal employees, but after a long meeting at the cabinet offices with the Prime Minister, their representatives came back to the negotiating table.

The state and municipal employees’ representatives were previously refusing to back the level of public spending cuts called for in 2011, which the Confederation of Icelandic Industry and the Icelandic Confederation of Labour had already decided to support. In exchange for their support in the matter, the government was willing to guarantee that increased tax takings would account for no more than 45 percent of its plan to cover the funding gap and spending cuts would cover the remaining 55 percent. The talk on Monday evening was of a much higher tax burden – amounting to some ISK 13 billion extra in 2011, but with less spending cuts than in 2010.

After the meeting with the PM, delegates reconvened last night to hammer out the exact wording of the deal.

According to Morgunbladid sources, all parties have now agreed on how to cover the government funding shortfall in 2011. According to those sources, the deal concerns itself with balancing the needs of households, public accounts, restructuring of the banking system, currency trade, contributions to the local governments’ rehabilitation fund, local government affairs and last but not least, goals in relation to the development of interest rates.

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