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.

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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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