The Prime Minister expressed his disappointment at VR’s decision to break off wage talks with SA on Thursday evening. The finance minister does not believe that his comments on the central bank’s interest rate hike were “the deciding factor”, reports RÚV.
Mixed message between ministers
This morning, Ragnar Þór Ingólfsson, president of VR (the shop and office workers’ union) confirmed to RÚV that he had withdrawn last night from negotiations with SA (the Confederation of Icelandic Enterprises), which had recently been referred to the state ombudsman. .
The reasons, Ragnar said, were “many”, although incongruous messages from Prime Minister Katrín Jakobsdóttir and Finance Minister Bjarni Benediktson about Central Bank interest rate hikes “played a role”.
Before the Central Bank announced it would raise interest rates, VR and SA were aiming for a deal based on lower inflation and a lower interest rate:
“But then the Central Bank announced a hike, which actually changed the premises from which we hoped to proceed,” Ragnar Þór told RÚV. “The Prime Minister then invited us to a meeting yesterday morning, during which she tried to reset the expectations of the parties. It was a very good meeting.
Ragnar observed that the parties proceeded to Karphúsið (the state negotiator’s facilities) where they hoped to continue their negotiations at noon.
“We have hardly sat down when an announcement is made by the Minister of Finance in which he echoes the message of the Governor (the Central Bank), which is completely at odds with what the Prime Minister had told us. After that, the negotiations became quite difficult. And when it became clear what kind of ideas SA had regarding a 14 month contract, which we had been discussing, it was obvious that there was no reason to continue negotiating.
A rise in interest rates without consequence
After a cabinet meeting this morning, Katrín Jakobsdóttir discussed Thursday’s failed wage talks with the RÚV. When asked if she wished the Central Bank wouldn’t raise interest rates, Katrín said:
“The Central Bank takes its own decisions in accordance with the statutory objectives under which it operates. It is not for me to comment on these decisions, but it is clear that this decision led to the failure of the negotiations.
“I regret that VR decided it was appropriate to leave the negotiating table at this time, but hopefully we can find some kind of opening,” added Katrín.
“Better to speak honestly”
This morning, Bjarni Benediktsson was asked to respond to Ragnar Þór’s claim that his comments, justifying the actions of the Central Bank, had been a decisive factor in the failure of the negotiations.
“No, I think it’s always best to be completely honest about things,” Bjarni remarked. “And I just saw a VR ad where no mention is made of my comments; it is likely that the premises changed following the decisions of the Central Bank, premises which probably served as the basis for the negotiations between the parties.
Bjarni told RÚV that it was clear that inflation would rise and that it was natural for the Central Bank to use the tools at its disposal to control inflation:
“But the truth is that inflation forecasts have deteriorated, and the phantom of inflation should follow us a little longer, and inflation will be higher next year than we had hoped for a while ago. just a few months old. The tension in the economy is high. We are approaching maximum production capacity and the level of employment is very high. Consumption is high, which is one of the factors highlighted by The Central Bank It does not really surprise me that the Central Bank continues to send these clear messages, that it will continue to fight inflation, and it is desirable that we all cooperate to do the same.
VR is Iceland’s largest union, representing some 40,000 workers.
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