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Articles 1 and 2 of the Convention. Employment trends and active labour market measures. The Committee takes note of the information provided in the Government’s report received in September 2009. The Government reports that its economy went into a major crisis in October 2008 when the banking system collapsed as a result of the global credit crunch, and that this recession will become even more severe in 2009. The Government further reports, that this crisis reduces the effectiveness of its monetary policies, and that repayments of credits can no longer be controlled. The Committee notes that, while there was little change in gross domestic product (GDP) in 2007 and 2008, forecasts allow for a contraction in GDP of up to 11 per cent in 2009. One of the consequences of the collapse of the banking system on the labour market is a great increase in unemployment, which rose from 1.3 per cent in September 2008 to 9.1 per cent in April 2009. The Government anticipates an average rate of unemployment for 2009 between 8 and 9 per cent. The Government also envisions unemployment benefits will be more than five times greater in 2009 than they were in 2008, i.e., about 25 billion Islandic krona (ISK). The Government further hopes that the economy will recover with a rate of 2–3 per cent each year as from 2010, achieving a budgetary surplus in 2012. The Committee notes new programmes that the Government has implemented, such as a measure to amend the rules of the Icelandic Student Loan Fund, to meet the needs of those who have suffered financial setbacks. The Government has also begun a new development project, Starfsorka, which consists of a three-sided agreement between the Directorate of Labour, a company, and a jobseeker for an engagement in a position that involves innovation and development together with the payment of unemployment benefits. The aims of this project are to, (i) support new ventures and development within companies; (ii) establish contact between jobseekers and companies; (iii) support entrepreneurs who have ideas for new ventures; and (iv) support jobseekers and facilitate their search for employment. The Committee invites the Government to continue to provide information on measures taken to mitigate the consequences of the financial and economic crisis on its labour market.

Education and training policies. The Government reports that the Vocational Education Council disburses grants from the Ministry of Social Affairs Vocational Education Fund. In this regard, employers’ and workers’ organizations, companies, vocational education councils in the individual sectors and educational establishments, in collaboration with the above parties, are entitled to apply for grants. The Government further reports that the amount available for disbursal from the fund in 2009 is ISK35 million. The Committee requests the Government to continue to provide in its next report information on the measures taken in the area of education and training policies and on their relation to prospective employment opportunities.

Business and household developments. The Committee notes that the Government is reconstructing the banking system. It is also providing grants to those with innovative ideas for enterprise creation or growth. The Government reports that it has made partial unemployment benefit payments available where recipients were employed part time, and that remedial measures are now available for jobseekers. The Government also reports that it prioritizes supporting households, protecting welfare and preserving “safety nets”, that its Housing Financing Fund has a variety of means to lighten the burden of mortgage holders and other financial institutions, and that it prioritizes the full-strength functioning of businesses as means to resuscitate the national economy. To this end, the Government has reduced customs duties and its value added tax, has introduced construction projects financed by the State, and has granted the Housing Financing Fund broader authorizations to grant loans for maintenance projects that create employment. The Committee asks the Government to provide information in its next report on the impact of the measures to facilitate business growth and household prosperity. In addition, the Committee requests the Government to include information regarding the remedial measures it provides to jobseekers, and the effects of the above measures on lasting and productive employment.

Article 3. Participation of social partners in the formulation and application of policies. The Committee notes that the Ministry of Social Affairs and Social Security appoints local seven-member labour market councils. Each council consists of two members who are nominated by workers’ organizations, two members who are nominated by the employers’ associations, and representatives of the Minister of Education, Science and Culture, the Minister of Health and the local authorities’ association. These labour councils are to submit annual reports to the Directorate of Labour in November, along with proposals on the labour market measures they wish to prioritize the following year. The Committee asks the Government to report on the progress achieved for the implementation of the Convention by these councils. It trusts that the Government will continue to provide information on the consultations held on the matters covered by the Convention with the social partners, including details of their contribution to the implementation of an active employment policy.