Icelandic Government Presents Plan to Lift Capital Controls

Prime Minister of Iceland Sigmundur Davíð Gunnlaugsson and Minister of Finance Bjarni Benediktsson presented a plan to lift capital controls—which have been in place since the banking collapse in October 2008.

The full scope of the measures concerns ISK 1,200 billion (USD 9.0 billion, EUR 8.1 billion). Sigmundur stated that lifting capital controls will prove a major boost for the economy and have a significant impact on daily life—describing the issue as the single most important to Iceland’s prosperity, ruv.is reports.

The ISK 1,200 billion are comprised of the assets of the bankrupt estates of the collapsed banks, worth ISK 500 billion; foreign claims of the bankrupt estates, worth ISK 400 billion; and offshore foreign-owned assets in ISK, worth ISK 300 billion.

Where the ISK 1200 Billion is coming from:

    The measures are intended to prevent the destabilization of the market.

    Sigmundur called the planned measures unique and unprecedented. They include a so-called ‘stability tax’ of up to ISK 850 billion combined, which will be imposed on the collapsed banks if the winding-up committees fail to complete composition by the end of this year.

    Bjarni said the measures mark a turning point. “They will lead to a brighter outlook and I believe that we are building a more solid foundation for the future. It’s the nation’s interests that are at stake.”

    The measures may cut the nation’s debt of ISK 1,450 billion by half, Vísir reports. Bjarni explained that this would lower the state’s interest payments, which again would create flexibility for strengthening societal infrastructure.

    At a cabinet meeting yesterday, the government decided to submit two bills, which together will form the basis for a comprehensive action plan for the lifting of capital controls.

    The measures were preceded by a legal amendment to tighten capital controls passed in record time by Alþingi, the Icelandic parliament, yesterday evening.

    Sigmundur explained that the legal amendment had been a precautionary measure, describing it as “cleaning the mines” before “sending off the convoy.”

    For further information, here is a link to a statement in English issued by the Ministry of Finance following today’s press conference.

    This piece was originally published by Icelandic Review

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