Union leader critical of Icelandic krona and monetary policy

A quarter of Icelanders’ earnings are going straight into keeping the krona currency alive — according to the head of the Union of Icelandic Electrical Workers. He told reporters that Icelanders living in ‘Kronaland’ are working in a financial sweatshop.

Gudmundur Gunnarsson explained that if Icelanders wanted to enjoy the same wages as people in the other Nordic countries, they would need to work 25 percent longer weeks. How did he come to his conclusion, Visir.is asks?

“It is first and foremost a question of interest. While we have this unstable currency, interest rates in Iceland can never go below five percent higher than other European countries.”

Interest payments and the inflation indexation of loans are the biggest reasons Icelanders have to pay more because of the krona, Gunnarsson says; adding that these factors also play into higher food and general living costs. Between 1 April 2006 and 1 April 2010, the krona has lost roughly half of its value, which has had a huge effect on people’s purchasing power.

“The situation is that the Union of Icelandic Electrical Workers is celebrating its 40th birthday at this time. Since it was founded in 1970, we have negotiated pay rises with employers of 3,500 percent. In the same time period our colleagues in Denmark have negotiated pay rises of 330 percent. Even then, we are still behind in purchasing power. It is not bad wage contracts which cause this, but rather the krona and bad [national] financial management which is always corrected by devaluing the krona,” Gunnarsson said.

Gunnarsson’s comments are the latest in an ongoing national debate about the future of Iceland’s currency, which has included the President and the governor of the Central Bank of Iceland, among others. Unlike President Olafur Ragnar Grimsson (who made anti-euro comments) and Mar Gudmundsson, central bank governor (who spoke in favour of the euro), Gunnarsson did not specifically mention the single currency or joining the European Union in his critique of the krona.

Comments are closed.