Hard-pressed Irish homeowners will find cold comfort in the news that Iceland is to write off €24,000 from every household’s mortgage.
Voters here are used to pre-election party pledges evaporating into the fog of fantasy but, in the land of frost and fire, politicians have proven they can be true to their word.
In April’s elections, prime minister Sigmundur David Gunnlaugsson said he would introduce sweeping measures to ease the burden of household debt.
And now he has put the country’s krona where his mouth is. The writeoff of €24,000 per mortgage will reduce household debt by 13% according to the government’s website.
According to RT.com, the government said the debt relief will begin by mid-2014. According to estimates, the measure will cost almost €900m.
That may seem like a slush-fund compared with the oceans of debt faced by many European nations, but bear in mind Iceland’s population is just over 320,000.
The population has been weighed down by debt since the financial crisis five years ago. The krona’s collapse drove borrowing costs much higher.
“Currently, household debt is equivalent to 108% of GDP, which is high by international comparison,” the government said in a statement.
“The action will boost household disposable income and encourage savings,” it said.
According to AFP, the debt relief promise has been met with scepticism, with the IMF, and the Organisation for Economic Co-operation and Development warning against it.
The IMF had previously said Iceland has “little fiscal space for additional household debt relief”, while the OECD had called for the mortgage relief efforts to target only low-income households.
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