ICELANDIC GOVERNMENT OPTIMISTIC PARLIAMENT WILL

C O N F I D E N T I A L REYKJAVIK 000198 SENSITIVE SIPDIS TREASURY FOR MYERS AND NORTON NSC FOR HOVENIER E.O. 12958: DECL: 11/04/2019 TAGS: EFIN IC NE PGOV PREL UK SUBJECT: ICELANDIC GOVERNMENT OPTIMISTIC PARLIAMENT WILL PASS ICESAVE AGREEMENT, TURNS FOCUS TO BUDGET REF: A. REYKJAVIK 191 ¶B. REYKJAVIK 190 ¶C. REYKJAVIK 176 Classified By: CDA SAM WATSON FOR REASONS 1.4 (B) AND (D) ¶1. (C) In a meeting with Charge and Econoff, Minister of Finance Steingrimur Sigfusson stated that he believes by next week the Icesave agreement will be out of committee and return to parliament for its second reading. He said that the government had learned from the last vote on Icesave and that this time the process will not drag out for months. Sigfusson expressed confidence that the vote will occur, and that the bill will pass, prior to the November 30 deadline stipulated in the amended Icesave agreement. ¶2. (C) With the Icesave issue seeming on track, the government has directed its attention to completing the 2010 budget by the November 30 deadline under Icelandic law. In an effort to address record deficits, the government is considering implementing significant budget cuts and tax increases, while also balancing the need to attract foreign investment (reftels A and B). Sigfusson acknowledged that the goals in the 2010 budget are ambitious, due in part to the larger than expected drop in consumption. He noted, however, that despite revised estimates projecting less growth in 2010 than previously anticipated, he expects the country to rebound even stronger in 2011 with some flexibility and understanding from the IMF. WATSON