Policy Statement by the Prime Minister at the opening of the 144th legislative session of the Althingi

Mr Speaker, Ladies and Gentlemen, 
Once again the forces of nature remind us of the hazards of living in the land of fire and ice. The turmoil now taking place beneath the ground and its manifestations in the form of eruptions in the interior of the country are both inspiring and unsettling. Inevitably, we think back to times when our ancestors were at the mercy of such upheavals and their consequences without any of the insights, equipment and resources that we have today.  It has been very gratifying and reassuring to realise how fortunate we are to have scientists of the first rank in Iceland and how our competently our civil defence organisations have responded to the situation. The contributions of all these people, and others, give us far greater security than we would otherwise have in the unpredictable environment of our dynamic country.

But notwithstanding these ever-present natural hazards, we in Iceland are fortunate to live in a country that is both beautiful and also richly endowed with natural resources.  Whether we consider living space, water resources, absence of pollution or the potential for food production, we find few nations in the world that enjoy such plentiful opportunities from Nature's hand as we have here. The land itself gives us a plentiful supply of renewable energy, while the beauty of the landscape and the resources of the sea provide us with the huge potentials in terms of economic prosperity.  Our human resources and accumulated know-how are constantly improving our ability to harness these reserves; a larger proportion of our population is now involved in research than is the case elsewhere in Europe.

Iceland now stands in first place among the nations of the world in terms of peace and gender equality. In fact, we rank high overall in international comparisons of living standards. Iceland has been placed Number 3 in a survey of the best countries to live in, and also in terms of effective democracy; as regards the rights and freedoms of various groups we are Number 9; we are in sixth place in terms of the independence of the media, in third place when it comes to the effectiveness of our public health policies and we rank Number 8 on the list of the most stable countries in the world.

These rankings are perhaps not hard-and-fast truths, but they do give a valuable indication of the privileged position we enjoy in Iceland. People tend, unfortunately, to lose sight of this fact all too often in public discussion and to concentrate instead on negative factors.

It is very important that we do not forget that we have here a society that many people elsewhere in the world could look upon with envy, with a strong and sophisticated infrastructure, abundant natural resources and the human talents and skills to enable us to create an even better community in the future.

During the past year we have managed to take some important steps to strengthen the economy and improve the household balance sheet.

The measures approved in the parliamentary resolution on household debt matters are now either already in place or else work is well advanced on them. The main one of these is the arrangement for the adjustment of index-linked housing mortgages, which more than 69,000 householders applied to avail themselves of this summer. The writing down of debt principals and the tax-free disposal of private pension savings will directly assist households with indexed mortgage loans, lowering their monthly payment burden and raising the disposable income available for the support of the family.

It has been gratifying and interesting to see the broad extent of participation in these measures; the great majority of those with index-linked mortgages on their properties applied to avail themselves of the opportunity.

Such a high level of participation must give the MPs on the opposition benches food for thought, since they fought with great vigour and determination against the adoption of these measures, which represent the most extensive actions taken since the economic collapse to assist ordinary households, and even voted against them here in the Althingi.

It is therefore clear that without the present government, no general measures would have been taken to assist the people in those homes that have been bought with index-linked mortgages. The debt adjustment is a matter of fairness for householders with these mortgages who received no help while as high-risk-taking enterprises and individuals were granted substantial debt write-offs. Moreover, the credit taken by these households had been bought up at discounts running into double-figure percentages without their being able to benefit from this situation in any way until now.

Targeted measures in fiscal affairs and economic management have produced results which are now attracting international attention. The economic growth forecast for Iceland published by the International Monetary Fund this summer illustrates for a growth rate of nearly 3% this year, with a slightly higher rate for 2015. The Central Bank of Iceland is forecasting even greater growth, with more than 3% for the current year and almost 4% in 2015. These are results which few, if any, other nations in Europe can boast of at the moment; indeed, they are scarcely without parallel anywhere in the world.

By the concerted efforts of the Government and the social partners we have managed to raise purchasing power and cut inflation to below the Central Bank's target level. Inflation has now been below the target for seven consecutive months. Such results have not been seen for more than 10 years; one has to go all the way back to 2002 and 2003 to find a comparable level of price stability. 

Stability and growth based on responsible economic management are also on the agenda in our forecast for government finances for the coming years. Tax cuts, a review of the tax structure, the lifting of capital controls and the Government's measures to write down the principals of household debt are some of the main features of the Budget proposals for 2015. Treasury debt has also fallen steadily and will be down to 74% of Gross Domestic Product by the end of 2015.

Labour-market participation is constantly on the rise, and our unemployment is quite low, at least compared to Europe or around 3% according to the latest figures from the Statistics Office, while the unemployment rate in Europe is 10% and 12% in the Euro-area.

The Treasury has now refinanced the loans from the Nordic countries by issuing a euro-denominated bond at attractive terms. This is a very important move which will save the Treasury considerable sums in interest payments, and is an indication of increasing trust in the management of our economy.

Priority has been given to improving the operational environment for businesses. It is gratifying to see that the proliferation of new enterprises is now firmer than it was over the past few years and the number of insolvencies has fallen by a fifth compared with last year.

Notwithstanding restraint in state finances, the Government has made it a priority to increase households' disposable income.  Thus, child benefit payments were raised by nearly ISK 3 billion from last year and income tax was cut by ISK 5 billion. Allocations for the elderly and the disabled were increased by about ISK 6 billion and an additional ISK 4 billion was put into funding for the health services and the purchase of equipment.

This recital of statistics about the economic recovery does not perhaps deliver a clear or immediate impression but the fact is that each of the elements I have mentioned has resulted in a real improvement in household finances and has contributed, directly or indirectly, to an improvement in day-to-day living standards for us all.

These substantial and important successes therefore lay the preparations for even greater progress towards a higher standard of living in Iceland. We intend to make the best use of this opportunity.

But in order to use the opportunities that face us in the future we must know where we are heading and have a clear vision of the sort of society we want to build on the sound foundations we have today.

Inevitably the world will undergo great changes in the coming years and decades. We live in a time of uncertainty and international conflict, but it is also an age of progress in science and technology which we must use to tackle the ever-quicker changes in our environment and nurture our social fabric.

Our aim must at all times be that the society we leave to the next generation will be in better shape than the one we were left by the last. The same applies to our country: while accepting gratefully what it gives us in such plenty, we must respect the delicate balance of nature and ensure that we draw on it in a responsible and sustainable manner.

And so we must try to look into the future and ask ourselves: What sort of country do we want Iceland to be in the years to come?

And even though we sometimes disagree about the routes to take towards our goal, most of us agree on the sort of society we want to build.

Families in Iceland should be able to make ends meet every month; disabled people should be able to live a decent life and our senior citizens should be able to enjoy the fruits of their life's work.

Everyone in Iceland should have equal access to the health services and social assistance. Everyone should have the same opportunities regarding education and advancement in their careers, and long-term unemployment should not be tolerated.

Young people should be able to find suitable employment when they complete their studies and regard Iceland as an attractive place to put down roots. They should be convinced that life is good here, that Iceland is a good place to start their families and bring their children up to share in the future. Icelanders themselves must believe in their country's future if we are to be able to build on the foundation of the strengths we already have.

We want everyone in Iceland to be assessed in terms of their worth, irrespective of what makes us different, and everyone should be equal before the law. We want the community to respect the individual's freedom and effort to mould his or her life, and we must also ensure that no one is left behind.

The Government should make a priority of creating this positive and healthy environment so that individuals and families are in a better position to realise their dreams and ambitions.

Even though the history of Iceland in the last century reads as one of the greatest transformations of any society that has ever taken place, much still remains to be done; it is always our aim to go further as each goal is achieved. In order to do this we need to be sensible and clear-headed; we need to collaborate and be determined in our work. We must reduce Treasury´s debt and resolve the issue with capital controls; we must enable business enterprises to engage more workers at better terms and generate the greater wealth needed in order to ensure welfare for everyone.

The Iceland of the future will only be achieved if we fight together for the right to use our resources, opportunities, skills and human resources in a rational manner so as to build a society based on welfare, equality, employment and justice – the society in which we want to live.

Ladies and gentlemen,
There is no doubt that we are faced with plenty of opportunities, but in order to make use of them, the government authorities must ensure that people will want to invest in Iceland and live in the country. This means that political stability is no less important than the economic stability. We must also make improvements in the economic environment so that new enterprises can grow within the country and create new and interesting jobs that will attract well-qualified young people.

The new Plan of Action from the Science and Technology Council allows, amongst other things, for greatly increased allocations to funds designed to stimulate competition and measures to facilitate investment by the business sector in research and innovation. This is intended to support the economy of the future and a progressive educational policy in accordance with the Government's intentions.

‘Innovation' does not refer exclusively to the activities of enterprises in the Hi-Tech sector. In order to maintain a varied economy, a good health system, the rational utilisation of resources and first-rate educational institutions, innovation must take place in all occupations in both the public and the private sectors.

Education is one of the most important challenges in the long term. Our future vision is that young people in Iceland will have a firm educational grounding that enables them to live and work in a constantly changing world.

The main strength in Iceland's educational system, which we intend to preserve and defend, is that it is uniform, with very little difference in academic performance from one school to another. Pupils are generally happy at school and the system is both flexible and free of excessive central control. On this basis we must take deliberate steps to improve reading skills, shorten the time taken in secondary school and expand and develop our vocational and technical training options.

We should be proud of our cultural heritage and draw on it in the future development of the tourist industry.

Now, as we receive ever more visitors from abroad it is even more important to cherish and cultivate our cultural roots.

We want to examine, in collaboration with local communities in each instance, the potential for culture-related tourist development and the establishment of special protected areas to support the overall development in each locality.

I have requested that collaboration of this type be launched, and preparatory work is taking place in the Office of the Prime Minister.

We must respond to the growth of the tourist industry so as to ensure that our greatest natural attractions are not damaged and degraded by growing visitor pressure. The Government has already taken steps to do this, and never before has funding been allocated so generously for this purpose than during the current year.

Our agricultural sector has become more competitive. Milk production has risen greatly, and preparations are under way to increase beef production. One of the aims of the new agricultural produce agreements will be to simplify the subsidy system and encourage innovation, recruitment and rationalisation.

The fishing industry is and will remain one of the main pillars of welfare in Iceland. Steps have been taken to improve the operational environment for seafood production and to support sustainable fishing. Work is also under way in the Ministry of Industries and Innovation on a new Fisheries Management bill; this will be the largest project handled by the ministry over the coming winter. As before, interested parties have been consulted on the matter, and it is evident that opinions are divided.

The economic importance of the rural areas is greater than many people realise at first. I am sure not everyone knows that the Eastern Region generates nearly a fourth of Iceland's exports revenues. It is not least with facts like this in mind that the Regional Development Plan covering the period up until 2017.

The aim of this plan is to put people everywhere in Iceland on the same footing as regards employment and access to services, to given them equality in terms of standard of living and to support the sustainable development of communities all over the country.

Our health services must continue to stand comparison with those in other countries, which means we must give careful attention to the foundations on which they stand. Substantial increases were made in allocations to the health sector in the budget for the current year and this was the first time in many years that this had been done.

In particular, efforts will be made to support work in the fields of preventive medicine and public health. For this purpose, a ministerial committee on public health has been established for the first time with the aim of improving public health in all age groups, with a particular emphasis on children and young people.

A programme of action on health up to the year 2020 is being prepared.  The emphasis in this will be to ensure that all people in Iceland will enjoy equal access to the health services. It is envisaged that the plan will be unveiled in the autumn.

It is clear to everyone that changes are needed on the housing market. An active long-term rental market must be built up; a more secure foundation must be laid down for cooperative and joint-ownership policies, while at the same time those who can and wish to buy their own homes must find themselves in an environment where this is a viable and natural course of action. All families and householders should be able to live in security, no matter whether they own, rent or share their homes.

A work is in process to abolish the CPI-indexation on consumer loans according to the proposals of the expert committee and approved by the Government.

Policy regarding future housing has been drawn up on the basis of detailed proposals from a project management committee. The Minister of Social Affairs and Housing aims to submit four bills during this session of parliament with the aim of making significant improvements in the field of housing.

It has also been decided that the expiry term for liabilities, or that part of liabilities that are not recovered in the event of bankruptcy, will to continue to be two years, and also it will still be possible to apply for financial assistance to pay guarantees in connection with the expense of bankruptcy proceedings.

Mr Speaker,
Iceland has lived under capital controls in place for nearly six years. The shelter that they have provided was necessary to cope with the aftermath of the collapse of the financial system in 2008.  Protected from the storms that have raged in Europe and elsewhere, Iceland managed, with stamina and great sacrifices, to get back on its feet. Healthy economic growth and significant results have been achieved in monetary policy, government finances and the employment sector. However, even though overall balance now prevails in the economy, a great deal of pressure is still present.

In addition to this, the economic barriers resulting from the capital controls result in suspicion towards the expansion of foreign investment in Iceland and render it difficult.

A major objective of this administration is therefore to bring Iceland's capital control regime to an end and return our economy to a normal financial footing.  In this, the interests of the Icelandic economy as a whole will be in first place.

Work will be done on resolving these problems in collaboration with the main interested parties in our society and finding a solution that is not just economically feasible but also acceptable from the political and social viewpoints. The Government will not approve solutions that entail further reductions in living standards.

A task force is currently engaged on these matters and will submit proposals on ways to address the capital controls. Its work is based on the proposals made by a consultative group on a comprehensive solution, taking into account all aspects of the capital controls and on earlier work commissioned by the Government.

The steering committee on the lifting of capital controls and the task force are assisted by competent foreign experts in the legal field and by economic advisors who help define the necessary macroeconomic criteria. The Government's policy regarding the lifting of the capital controls will take account of these conditions and also of a detailed analysis of the implications for the balance of payments.

It is expected that the outcome of this work, and proposals to the Althingi on legislation, will be presented in the coming months. Amongst other things, this should facilitate the settlement of the debts of the insolvency estates of the defunct banks.

Our intention is therefore to promote a resolution that is at all times consistent with Icelandic law, in accordance with best international insolvency practices and compatible with Iceland's future economic stability and growth.

Ladies and gentlemen, 
As we are now being vividly reminded by natural upheavals, living in Iceland will never be without its challenges. But history shows us that when we are alive to the opportunities our country and its people offer, we can achieve amazing results. The foundations laid down by past generations and the successes of the past few decades have made Iceland into one of the world's best countries to live in. But there are still challenges to face and great opportunities for further advancement. Our great strengths and advantages mean we are in the position to do even better. We must work together towards this goal.