Iceland\u2019s new government will target measures to help households cut their debt loads, including forcing write downs on assets held by the creditors of the island\u2019s failed banks.<\/p>\n
\u201cIt\u2019s right to use the space, which will likely be formed in the winding up proceedings of the estates\u201d of the three failed banks \u201cto accommodate borrowers and those that put their savings into their homes,\u201d the government said in its economic program released today.<\/p>\n
Measures will include ending a practice of linking mortgages to the consumer price index, a step that will \u201cstrengthen the foundations of monetary policy, which is an important part of removing capital controls,\u201d the Progressive and Independence parties coalition said.<\/p>\n
The leader of the Progressive Party Sigmundur David Gunnlaugsson will become the next prime minister after winning last month\u2019s elections together with the Independence Party. Among the new government\u2019s goals is a plan to shelve indefinitely European Union accession talks started in 2010.<\/p>\n
Gunnlaugsson will head a coalition together with the Independence Party led by Bjarni Benediktsson, who will become finance minister. The two ousted the government of Social Democrat Prime Minister Johanna Sigurdardottir in Iceland\u2019s April 27 elections.
\nLoan Ban<\/p>\n
The EFTA Surveillance Authority, which monitors Iceland\u2019s compliance with the European Economic Area agreement, today said the country must lift a ban on mortgages linked to foreign currencies because it restricts the free movement of capital.<\/p>\n
\u201cIt can be lawful to restrict the granting of such high risk financial products to consumers,\u201d EFTA said. \u201cHowever, a total ban on granting such loans to individuals and companies goes beyond what can be considered necessary in order to protect consumers.\u201d <\/p>\n