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Iceland Unveils Historic Economic Package to Fight Crisis

Bloomberg logo Bloomberg 3/22/2020 Ragnhildur Sigurdardottir
a large body of water with a city in the background: REYKJAVIK, ICELAND - SEPTEMBER 02: A general view of Reykjavik is seen from the top of Hallgrmskirkja church on September 2, 2018 in Reykjavik, Iceland. (Photo by Maja Hitij/Bongarts/Getty Images) © Photographer: Maja Hitij/Getty Images Europe REYKJAVIK, ICELAND - SEPTEMBER 02: A general view of Reykjavik is seen from the top of Hallgrmskirkja church on September 2, 2018 in Reykjavik, Iceland. (Photo by Maja Hitij/Bongarts/Getty Images)

(Bloomberg) --

Iceland is introducing emergency measures worth 8% of gross domestic product to counter the impact of the coronavirus.

The 230 billion krona ($1.6 billion) package includes state guarantees on bridge loans to businesses and the payment of as much as 75% of people’s lost salaries over the next 2 1/2 months, the government said on Saturday.

In addition, public projects worth 20 billion kronur will be moved forward to this year and tax breaks for banks will kick in sooner than originally planned.

“The measures we are introducing today are unprecedented,” Finance Minister Bjarni Benediktsson said.

But with the number of confirmed cases of coronavirus in Iceland rising to 473, Prime Minister Katrin Jakobsdottir conceded those efforts may not suffice.

“We are looking at the next weeks and months. We are aware that we need to do more and we are determined to do what it takes to get Icelandic society through this,” the prime minister said.

On Sunday, Iceland’s Health Ministry said gatherings of more than 20 people will be banned, and shut down a number of services including public pools and gyms. Primary schools and kindergartens will remain open.

The central bank has cut its benchmark interest rate to an all-time low of 1.75% since the start of the outbreak, and Governor Asgeir Jonsson has said the bank still has “room for more cuts.” Treasury bond issuance in the second quarter is to be increased to a maximum of 40 billion kronur.

Read more: Iceland Cuts Rates to New All-Time Low as Virus Spreads

(Updates with latest restrictions on movement due to virus)

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