Government of Iceland plans to reduce household debt

Noam Stiekema

The Government of Iceland officially presented the promised program to reduce household debt, soared to the skies in the banking collapse in 2008. It will be applied from the beginning of 2016 a. Its price is around one billion EUR, which will benefit 91,000 candidates. The idea has opponents who disagree taxpayer money to go […]

Iceland debts

Iceland debtsThe Government of Iceland officially presented the promised program to reduce household debt, soared to the skies in the banking collapse in 2008. It will be applied from the beginning of 2016 a. Its price is around one billion EUR, which will benefit 91,000 candidates. The idea has opponents who disagree taxpayer money to go to reduce private debt against a number unresolved social problems in the country. The 4-year program of the Icelandic government covers mortgages tied to inflation with a maximum limit of 26,000 EUR per household. A reduction of capital and tax relief. The aim is to stimulate consumer demand and economic growth.

Cabinet plans to finance the program through higher taxes on banking institutions and cut four billion dollars of debt owned by foreign investors in failed Icelandic banks. The initiative was a campaign promise of Eurosceptics, remove power from the Social Democratic Alliance parliamentary elections in 2013.

“Since the presentation of the idea of elections 2013th was clear that the state should intervene if people want faster debt reduction”, the Prime Minister Sigmundur Gunnlaugsson of the Progressive Party. Partner in the office of the conservative Independence Party also defended the initiative. “Interest rates are falling, inflation is low. Since the beginning of the mandate was clear that one of our main projects is to give security of households”, said Finance Minister Bjarni Benediktsson.

Around 2,000 people protested in front of parliament, however, in Reykjavik against credit relief. They are demanding money from the program to go on strike because of low income sectors of health and education. There are also concerns that the government program will hit on the credit rating of Iceland and will deter foreign investors.

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