A three year agreement between SA-Confederation of Icelandic Employers and ASÍ, Iceland’s main trade union is expected to be signed this afternoon. This will insure stability on the labor market during that time, but many fear that inflation will increase due to hefty wage increases. According to information from those negotiating RÚV reports that wages will increase 4.25% June 1, 2011, 3.5% on February 1 2012 and 3.25% in 2012. In addition to this three one-time payments totaling 75 thousand ISK (500 €, 650 USD) will be paid to each employee this year.

The Central Bank has said that the agreement sets inflationary pressure on companies. The leader of the opposition, Bjarni Benediktsson, Chairman of the Independence Party, asked Prime Minister Jóhanna Sigurdardóttir about this in Althingi this morning. Sigurdardóttir replied that Statistics Iceland expect inflation to be 0.5% higher than it was previously forecast, because of this new agreement. It is not clear what this new forecast is, since the information is not official.

Benediktsson stressed that the major problem in the Icelandic economy was that the government had not answered where in the economy one could expect growth.