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State’s Share in Banks May be Sold

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State’s Share in Banks May be Sold

Landsbankinn

Photo: Páll Stefánsson.

Selling half of the Icelandic state’s share in the country’s banks in the next five years could reduce the state’s debt to 10-15 percent of GDP by 2022, RÚV reports. That year is how far the government’s budget plan goes, according to Minister of Finance Benedikt Jóhannesson, who covered the subject in an article in the weekly Vísbending, published yesterday.

In his article, Benedikt refers to the budget plan, which aims at lowering the state’s debt from 44.5 to 26 percent of GDP by the year 2022. He notes that the debt can be reduced even further by selling the state’s share in the banks, although that’s not figured into the budget plan. He estimates the value of the state’s share in the banks at 15-20 percent of GDP.

A draft introduced last week regarding the state’s bank ownership policy, the plan is to sell the state’s 13 percent share in Arion Bank, all of Íslandsbanki, and 60-66 percent of Landsbanki. Thus, the Icelandic state would go from owning the majority of Icelandic banks to owning only a third of one bank.

“I believe we should make sure that market conditions are favorable, and also that there is a consensus about the sale,” Benedikt told RÚV. He believes the sale of the banks could begin this term, but expects the whole process to last beyond the term.

Smári McCarthy, MP for the Pirate Party, stated there is no rush to start selling the state’s share in the banks and suggested postponing discussion thereof until 2020. He believes the conditions for the sale are not favorable and warned against privatization. He suggested lowering the interest rate on state debt rather than paying off debt through the sale of banks.

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