Sigrún Davíðsdóttir's Icelog

In historical perspective, the left victory in 2009 was truly surprising but the great loss of the left now is much less surprising. Iceland has, since 1944, been a conservative stronghold. The recent results do not necessarily demonstrate any nostalgia but rather the political norm in Iceland. What the left, especially the Alliance (social democrats), lost now was the opportunity to break the norm

The left and its Freudian death wish

Compared to the situation in Ireland, not to mention Greece, the left coalition of the Left Green led by the Alliance, social democrats, did a tremendous job of turning recession to growth – albeit a paltry 1.6%, not much to shout about where 6% and more seemed the law of nature some years ago. And it is no less a tremendous success to get from 10% unemployment down to below 5% at the beginning of the year (end of March 6.8%).

Although Iceland is now in its third year of growth, the Government treated its success as the merest nothing. It sure did not make a song and dance about it. The two parties in power, both ministers and MPs, have been their own worst enemy, belittling its success – a prime example of what Sigmund Freud meant by “death wish.” Either, they did not realise what a feat they carried through or they did not have the political confidence to believe in what they did.

There is though a bit more to this inability to profit from success. Being a left Government they seemed to conclude that with the emphasis on private debt and the unavoidable hit so many families took due to indexed loans and forex loans (both these loan types are a whole saga in itself) they could not really step out and tell the voters, who did not sense a turnaround, that things were actually not that bad, compared to other countries. And the measures taken by the left Government only seemed to increase the discontent.

The Government could not – or did not dare to – tell voters that measures to write-down private debt were actually working. In June last year, the Central Bank of Iceland published a detailed paper, Households’ position in the financial crisis in Iceland, showing that the debt crisis stemmed from imprudent lending in 2007-2008, i.e. before the crisis hit but was alleviated by measures taken by the Government.

Again, the Government made little of this and other research and allowed the opposition to monopolise the debt debate.

There is no doubt more to the left

Compared to the UK Labour party that turned its fortune around after the election in 1997 by turning into an electable party and not just a lightening rod for an antry electorate, the Icelandic social democrats squandered their four years in Government. There is no doubt more to the left loss and others might explain it differently – but whatever the explanation the loss is spectacular and the largest in the history of Iceland: a loss of 27%.

The Progressives and Pascal’s Wager

The Progressive Party, which had for a long time been promising a 20% general write-down of all household debt, went fishing on the wide ocean of discontent. Now, not only promising the 20% – though never writing it down as an election manifesto but only referring to it now and then – it outdid itself by promising to miraculously squeeze ISK300bn (€195m) out of the creditors to Glitnir and Kaupthing and distribute it to indebted households, in no time at all.

No matter if political opponents showed that this would profit non-struggling households with high debt and not those who according the CBI Working Paper were struggling to make ends meet, voters embraced the idea very much like Pascal’s Wager: maybe the Progressives cannot deliver but then they are no worse an option than others; if they per chance could it’s better to vote them in.

End of January, when the EFTA Court ruled in favour of Iceland in the Icesave dispute, the Progressives could say that yes, they had been right on Icesave and so they would be on this. No one mentioned that in autumn 2008 their leader Sigmundur Davíð Gunnlaugsson said he would single-handedly solve the crisis by securing a Norwegian loan. He travelled to Norway but failed to deliver the loan.

The Progressives made no mistake in their election campaign. Being large on promises and silent on solutions served them well. A remarkable success given the fact that only a year ago it seemed the party would silently evaporate. Historically a rural party, always greatly aided by the imbalance between urban and rural votes (in some cases one rural vote equals three in Reykjavík) the party was doing so badly in Reykjavík that Gunnlaugsson, fearing he would not get elected in his constituency, Reykjavík, moved North to take the top seat there.

The Progressive turn-around is a much more remarkable feat than the Independence Party again returning to being the largest party – because that is what the Independence Party has almost always been.

And the next Government – a strong two-party coalition or weaker political patchwork?

It is now up to President Ólafur Ragnar Grímsson to choose who first gets the mandate to forming a Government. The procedure follows no rules but the tradition is that the President talks to leaders of all parties presented in the Icelandic Parliament, Alþingi. The President then gives the mandate to the leader he deems most likely to form a Government, based on what he has learnt from the party leaders.

The only two-party option now is a coalition of the two largest parties. Sunday, both leaders spoke favourably in that direction, the IP leader Bjarni Benediktsson perhaps more than Gunnlaugsson. A two-party coalition has very much been taken as given in Iceland for the last few days, also because these two parties have been together in Government for 26 years, out of 69 years since 1944.

However, the promises of the Progressives might render the party toxic to other parties since no one outside of the party can see how this extensive deb-relief can be brought about. Given the promised speed of delivery, the Progressives could lose popularity quicker than Francois Hollande if the party gets to lead the Government and so would its fellow-coalition party.

Furthermore, the other parties have pointed out that if all this money were available, pumping it into the economy would be hellishly unwise. Much better using it to pay off public debt. – On other issues, the two parties seem natural allies, such as job creation, energy, and belief in market solutions, lower taxes and anti-EU stance. Together, the two parties strengthen each other’s tendency to isolationistic views.

It is pretty clear that Grímsson will ask either of the two – Gunnlaugsson or IP’s leader Bjarni Benediktsson – to form a Government. Both parties have 19 seats in Alþingi though the Independence Party got more votes. Grímsson could turn to Gunnlaugsson because his party is the real winner in terms of the leap the party has taken – or he could turn to Benediktsson as the leader of the largest party.

Most Icelanders feel that Grímsson not only wants to act as a midwife, assisting a new Government into the world, but has great desire to play a political role in forming it. However, the President is bound by the political realities – the party leaders will have to live with the Government formed, not the President.

The general sense is that Benediktsson, whose fiercest enemies are found among the old guard in his own party, will not get any political peace unless he secures the Prime Minister post. Gunnlaugsson, being a younger leader of a unified party, is seen as less needy in this respect. And playing the second violin in Government might free the Progressives from the apparently hopeless task of delivering the debt-relief.

There are however all sorts of theoretical possibilities in the present situation.

A Progressive-Left Government has often been mentioned in the last few weeks. Often though it has been as a warning to Independence Party voters not to vote for the Progressives as many of them seemed inclined to do and did.

With six parties, there certainly are many possibilities of a political patchwork Government. But after a weak left Government of warring factions, a two-party coalition of parties that have a long history of being together in Government and which in most respects are politically close to each, so as not to say intimate with each other, does seem the most likely option. Unless it does not work out.

– – –

Some facts: there are 63 seats in Alþingi, hence 32 is the lowest number of seats to secure majority. The two large parties have 19 seats each, the social democrats have 9, Left Green 7 – and the two new parties, Bright Future and the Pirates get respectively 6 and 3. (The final results, with all parties, in Icelandic.)

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According to the numbers I am waking up to, the Independence Party and the Progressive Party have the same number of members of Parliament each, 19 MPs each although the Independence Party has 26.7% and the Progressives 24.4%. The reason is, as I explained last night, different weight of votes between rural areas – where the Progressives get most of their votes – and the urban constituencies in Reykjavík – where the Independence Party has most followers.

The present coalition has lost 27% of its vote, a significant slap – the social democrats, the Alliance, lose 11 seats, have now 9 MPs; the Left Green loses 7 MPs, keeps 7 MPs, with respectively 12.8% and 10.8%.

Bright Future and the Pirates are the only new parties that gain MPs, Bright Future gets 6 MPs, 8.2% and Pirates 3 MPs, 5.1%.

The next step towards a new Government will be taken by the President of Iceland Ólafur Ragnar Grímsson. He now has to choose which of the two leaders of the two biggest parties, Sigmundur Davíð Gunnlaugsson from the Progressives and Bjarni Benediktsson leader of the Independence Party gets the opportunity to form a Government. The Progressives have given the voters generous offers with very little details as to how to fulfill their promises. If the Progressives will be asked first the Independence Party might be worried to join a Progressive-led Government.

The only chance of a two-party coalition with a strong majority is a Government with the two largest parties. It is still too early to see if other routes will be taken but it now seems likely that two anti-EU parties will be in coalition. The Progressives have used bold words about squeezing money out of foreign creditors of the two collapsed banks, Glitnir and  Kaupthing. Both the sovereign itself and some major Icelandic companies will need loans to refinance debt in the coming years. These will have to be foreign loans in foreign currency. Any move that closes international capital markets to Iceland will endanger the economic progress so far. The last four years have been tough – and so will the coming years be.

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So far, Independence Party is the biggest party in the two Reykjavík constituencies. The Progressives have always been a rural party and that is where the party finds its major support. Luckily for them, there is an unbalance in the weight of votes in rural vs urban, i.e. Reykjavík meaning that one vote in some of the rural constituencies equals three in Reykjavík. This means that even though the IP might get more or less the same percentage of votes as the Progressives or even slightly more, the Progressives might get more MP. However, it now seems that the IP will clearly be the largest party, decidedly bigger than the Progressives and also with more MPs.

At this point, the status is the following:

IP 24% – 19 MPs

Progressives 22.6% – 17 MPs

Soc dem 13.1% – 9 MPs

Left Green 12.2% – 9 MPs

Bright Future 7.9% 5 MPs

Pirates 5.7% – 4 MPs

The other nine parties that ran in this elections do not seem to be getting any MP elected.

There are 63 seats in Alþingi, the Icelandic Parliament, meaning that 32 are the minimal number of seats for a Government. IP and the Progressives could comfortably form a two party coalition.

– – – –

Nope, some changes:

IP 27.6% – 21 MPs

Progressives 23.6% – 18 MPs

Soc dem 13.2% – 10 MPs

Left Green 11.3% – 8 MPs

Bright Future 7.9% 6 MPs

Pirates 4.6% – 0 MPs

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So far, Progressives are gaining 8% – but social democrats are losing 17%, more than any party ever in the history of Iceland.

For comparison, the results in 2009:

IP 16 MPs – 23.7%

Progressives 9 MPs – 14.8%

Soc democrats (the Alliance) 20 MPs – 29.7%

Left Green 14 MPs – 21.68%

The Citizen Movement 4 MPs – 7.2% (a new party in 2009, not running now but some of the Pirates were in Parliament for the Movement)

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This time there were 237.957 voters registered. The participation is 83%, 85.1% in 2009.

This is the result from the constituency around Reykjavík:

IP 25.0%

Progressives 17.6%

Social democrats 13.9%

Left Green 5.8%

Bright Future 8.3%

Pirates 8.3%

Two of the new parties above 5%:

Dawn 5.6%

Other parties get less than this.

Nothing will be clear until quite late, it seems.

– – – –

North West:

IP 33.1%

Progressives 28.2%

Social democrats 11.2%

Left Green 10.9%

Here, the IP is doing better than expected. Left Green not losing as much as expected.

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Although the swing in the elections seems to be remarkably large compared to 2009 it is a swing back to the past. The 2009 results were an exception in the sense that left governments have only ruled Iceland twice and only for one year at a time before the coalition of social democrats and Left Green, in office since spring 2009.

There are six constituencies. First results from Southern Iceland:

IP 28.4%

Progressives 33.5%

Social democrats 10.6%

Left Green 2.4%

Bright Future 4.8%

Pirates 3.9%

Other parties get less than this. The above parties are those expected to get MPs.

The Progressives normally get majority of their votes in rural areas such as this part of the country.

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“In spite of all Gudbjartur Jonsson’s faith, it had come to this, that the merchant no longer existed. Finished, gone up in smoke, the shop empty, the account-books lost, the Tower House sold for the benefit of the creditors. In such a fashion, one fine day, were the foundations upon which the crofter had built his life swept aside; those almighty giants of commerce who stood with one foot in Iceland and the other on the continent itself – one fine day saw them wiped away like so much spit.”

Laxness, H. (1934-35), Independent People, p. 389.*

Guðbjartur or “Bjartur í Sumarhúsum,” Bjartur in Summerhouse, is the protagonist of the novel Independent People by Halldór Laxness, who won the Nobel Prize in literature in 1955. His novel is the best description there is of the Icelandic mentality: Bjartur is the peasant who in his endeavour to survive on his own, independent of others, sows for his enemy to reap, according to Laxness.

It may be an over-simplification to attribute the conservative streak in Icelanders to this mentality. But contrary to the other Nordic countries the Independence Party, the conservatives, have shaped the politics of post-war Iceland together with the Progressive Party, a centre party originating in the co-op movement and the rural communities.

The Progressives have for a long time, successfully, resisted a shake-up of the electoral system towards re-balancing the weight of rural versus urban votes. In some of the smaller rural constituencies one vote has three times the weight of a vote in Reykjavík. This explains why the party most likely stands to gain more members of Parliament although the two parties – the Progressives and the Independence Party – will get similar results measured in percentage of votes.

According to the latest Rúv-poll, the result is the following:

IP 27.9%

Progressives 24.7%

Social democrats (the Alliance) 14.6%

Left Green 10%

Bright Future 6.6%

Pirates 6.1%

Other parties get less than 5%

Based on this result, the IP  would get 18 members of Parliament but the Progressives 20. The magical number of majority in Alþingi – the Icelandic Parliament – is 32 seats. If the two parties get the abovementioned seats they will hold a comfortable majority.

The question is then: who will be asked first to form a Government – the party with the largest percentage of votes or the party with most elected Parliamentarians?

Much might depend on the answer to this question. There are varying opinions as to the answer but also to the significance. Some claim that no one will actually want to form Government with the Progressives who might stumble in fulfilling their promises of extensive distribution of funds, squeezed out of foreign creditors to the two collapsed banks – Glitnir and Kaupthing – to indebted voters. By breaking campaign promises soon the Progressives would lose popularity even faster than Francois Hollande. Joining another party, as a second violin might make the situation easier for the Progressives.

There are various number games in the situation. The IP might surprise and turn to the social democrats and Bright Future, two very similar parties (BF is partly an offspring of discontent Alliance people) but again, because they are similar the two parties might not be a reliable ally. Or, if asked first, the Progressives might turn to the left parties to form a left Government or to Alliance and Bright Future to form the first Icelandic centre Government.

And so forth – various possibilities.

However, given the number of votes to the two parties that have been together for 26 years in Government after 1944 – and out of the 69 years since the foundation of the Icelandic republic, the Independence Party or the Progressives or both have been in Government for 63 years.

The joint story and rule of the two parties has lead to the concept of the “half-and-half rule” of the two parties, meaning that they have for decades divided Iceland and its resources between the two parties. Nowhere was this as clear as when it came to the privatisation of the two big banks – Búnaðarbanki and Landsbanki – where people connected to the Progressives happened to buy Búnaðarbanki and people connected to the IP bought Landsbanki.

If the two parties form a Government following the elections tomorrow it will be a return to the tried and tested “half-and-half rule.” Some see this rule as a major factor in the collapse in October 2008 though this is clearly not how ca. half of the voters gauge the situation. Support for the two old parties can also indicate certain nostalgia towards earlier times of perceived stability. But most likely, it indicates that the present coalition parties – social democrats and Left Green – which in Government managed to turn recession to growth and turn the unemployment curve, have been exceedingly bad at taking credit for this achievement. As politicians so often experience success is seldom rewarded.

Campaigning atmosphere in Reykjavík today – great weather, music and sunshine. This brings out the Mediterranean streak in Icelanders, always ready to use a good opportunity to “lick the sun” as Icelanders say

*Update: I forgot to mention that the Laxness quote is taken from a CBI’s working paper: Households’ Position in the Financial Crisis in Iceland – an informative report on household debt in Iceland. As the political parties, especially the Progressive Party, have focused so heavily on household debt one might easily be led to think the situation is particularly bad in Iceland. This paper shows that is not the case, seen in historical perspective.

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Yesterday was the first day of summer, according to the old Icelandic almanac – and that is when Icelanders say “gleðilegt sumar” (merry summer) to each other. This sentence has been echoing in the crisp chilly air here in Reykjavík and will stay in the air for the next few days. On the first day of summer, parents give their children “summer gifts,” something useful like a ball to play outside etc. And to those one knows well, one adds “og takk fyrir veturinn” – thank you for the winter.

To Icelog readers: “gleðilegt sumar og takk fyrir veturinn.”

It snowed a bit in Reykjavík yesterday and the temperature was below zero during the night between winter and summer. In old lore, it bodes for a good summer when winter and summer “freeze together.”

Another thing: observant readers will notice that I have recently started to write Icelandic names and words with Icelandic letters, acute accent and all. I’ve been oscillating on this matter, did it once, dropped it but yes, now Icelandic names on Icelog are all Icelandic.

Normally, when the letters ó and ö are transcribed into English (or, for that matter, any other foreign language using the Latin alphabet) they are both replaced with o. Hyper-correctly, ö should be transcribed as oe, æ as ae. And so on. For the sake of clarity and simplicity I will from now on stick to the Icelandic alphabet.

One way of semi-transcribing Icelandic names is to use only the acute accent over vowels – á é í ó ý – but not the special Icelandic letters þ and ð (I have done this on my business card: Davídsdóttir instead of Davíðsdóttir). That is one way of doing it. When foreigners attempt to do it they almost always get it wrong, some accents are kept, others lost. For a foreigner it is really tricky to use the accents correctly. Copying Icelandic names is the easiest procedure.

Those who use my Icelandic version can copy the names or words directly or drop the ð and þ but keep the accents. Whatever the procedure, they can at least rest assured that it is correct Icelandic.

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The al Thani case has taken yet another unexpected turn – it seems that there are only unexpected turns in this case. Instead of postponing the oral hearing until February next year, as Justice Pétur Guðgeirsson of Reykjavík County Court had decided after a meeting with the new defence lawyers, the case will be assigned to a new judge, Símon Sigvaldason. Guðgeirsson will be off due to illness. The oral hearing is now set to start 21 October. The Office of the Special Prosecutor and the defendants heard of this yesterday, according to Rúv.

The al Thani case relates to the share purchase of a Qatari investor from Qatar’s ruling family. He bought 5.1% of shares in Kaupthing in September 2008. It later transpired that Kaupthing financed the purchase. The case has strong parallels to a Qatari investment in Barclays in autumn 2008, saving the bank from seeking a bail-out from the UK Government (link to earlier Icelogs on the al Thani case).

This is the latest in a long wrestle over bringing the al Thani case to court. As reported earlier, the defense team of Sigurður Einarsson chairman of Kaupthing and Ólafur Ólafsson, the bank’s second largest shareholder, had used up all possibilities to have the case thrown out or postponed when they brought about a delay by simply resigning from the case and then refusing to obey the judge when he refused to accept their resignation.

The fact that the court itself has now taken action to diminish the delay indicates that further delaying tactics might prove more difficult. Those following the prosecution of bankers in Iceland are no doubt in for some interesting twists and turns in the different trial sagas.

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