Action plan for household debt crisis

The Government has presented an action plan to the Parliament in ten points to address the debt issues of households in Iceland. It specifies targeted measures to tackle the debt crisis of Icelandic households caused by the unforeseen rise in the principal of indexed housing loans that resulted from the financial system collapse. The fundamental aim is to achieve adjustments due to the inflation spike of the years 2007–2010. This involves general measures independent of the borrowing period with an emphasis on equity and efficiency of remedies.

Several of the factors that need to be considered in the implementation and execution of proposals for debt adjustment are:

• The cost to the state treasury.

• The money supply and its effects on inflation.

• Effects on the financial system.

• The cost to the financial system in executing the proposals.

It is expected that the ministerial committee on solutions to household debt issues will oversee the project as a whole, but individual ministers who are members of it will be responsible for specific actions. The work will emphasise seeking broad consensus on the paths that will be taken to achieve the goal of resolving the debt issues of Icelandic households.

The measures are, on one hand, direct and involve the submission of bills in the coming weeks and months, and on the other hand, time-limited reviews aimed at delivering clear action plans following analyses by experts on the possible paths to rectify the assumptions that faltered with the financial system collapse.

Here is the proposal in its entirety, adgerdir-vegna-skuldavanda-heimila.