Sigrún Davíðsdóttir's Icelog

Iceland: political instability in spite of “doing it right”

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To claim that Iceland has done all the right things since the financial crisis is hubristic. However, in the grand scheme of things it can be argued that the four governments, in power from 2008 until now, have broadly speaking done what needed to be done: the banks were dealt with without too great a public cost, an independent commission investigated the causes of the crash, matters related to the time up to the collapse have been investigated and individuals prosecuted; the economic policies have broadly stimulated growth, lately fuelled by boom in tourism. Yet, all of these sensible measures have not secured political stability as can be seen by elections held in 2016 and 2017.

Already by summer 2011 Iceland was back to economic growth in spite of the calamities of the banking collapse in October 2008. In spring the previous year, the Special Investigative Commission, SIC, had published its report. In the following years, the Office of the Special Prosecutor, now the District Prosecutor, was busy investigating and bringing bankers and their business partners to court. Well over twenty people have been imprisoned.

Iceland was not the only country hit by the financial catastrophe starting in 2007. In countries like the US and Britain, voters’ anger is often explained by the fact that in these countries little has been done to clarify what went on in the banks, the creators of the financial turmoil that hit various Western countries in 2007 and the following years.

In a long blog in September 2015 on the Icelandic recovery I pointed out that in spite of good recovery and growth the soul of the Icelanders was lagging behind: voters did not seem to embrace the parties bringing them a growing economy. That still seems to be the case judging from the political situation. Trust in political parties and party support is unstable and swinging.

This could very well be the future in Iceland as elsewhere: no matter the growing economy voters don’t put their trust in political parties as they once did, fewer belong to political parties or identify with a single party. It really isn’t about the economy any longer but a more elusive public mood.

Elections one year, minus a day, from the 2016 elections

Last year, the election was held on 29 October. This year it is on 28 October. Last year, the election was brought about by the then PM Sigmundur Davíð Gunnlaugsson leader of the Progressive Party having to step down due to the exposure in the Panama Papers of an offshore company held by him and his wife. The 2016 election ended the two-party coalition with the Independence Party (C) led by the Progressive Party.

In autumn this year, the coalition with two new centre liberal parties, Bright Future and Revival, led by the Independence Party fell when Bright Future lost the trust in PM Bjarni Benediktsson, a story recounted earlier on Icelog. When leaked document on Benediktsson’s business dealings in 2008, conflicting with his earlier explanations surfaced recently it seemed this would weaken the party’s standing (see Icelog).

A swing from left to right – but yet an Independence Party disappointment 

To begin with, opinion polls indicated that a left government, albeit a coalition of three to four parties, was looming on the horizon – the only Icelandic left government that ever sat a full parliamentary term was the left government in power 2009 to 2013. The Left Greens and Katrín Jakobsdóttir, the party’s very popular leader, seemed to be raking up a lot of votes, at one point giving the Left Green a clear lead as the largest party. The Social Democratic has been in a limbo since the 2013 elections; its new leader, Logi Einarsson, did not seem to appeal to the voters but might have been a necessary support for the left government

In the last few days, the political landscape has been changing dramatically with the Independence Party surging ahead of the Left Greens. In a historic context the Independence Party surge is no surprise and also last year the party surged ahead in the last few days up to the elections. In one sense this indicates support for Bjarni Benediktsson and his party but the numbers are less uplifting: the party stands to lose around 3 to 5% and possibly four MPs. In addition, the forecast now would be a historic low for Benediktsson’s party, far from its 20th century earlier glory of licking the 40%.

The most surprising swing is the Social Democrats great gain in the polls. They seem to be attracting votes from the Left Green and the Progressive Party. Revival is crawling above the 5% threshold, needed to get the first MP elected. Only some weeks ago the party hastily elected a new leader, Þorgerður Katrín Gunnarsdóttir, after party founder Benedikt Jóhannesson’s unfortunate remarks on sufferers of sexual violence. Gunnarsdóttir is an earlier Independence Party MP and minister who left politics for some years after 2008 due to her links to Kaupthing where her husband worked. In a Parliament of very inexperienced MPs Gunnarsdóttir has proved a skilled politician.

Another surprise: former Progressive leader, the disgraced Gunnlaugsson, who resigned in autumn from his old party to form a new one, the Centre Party, is making good progress, well ahead of his old party. This, although Gunnlaugsson has mostly been invisible in Parliament all through the year though not calling in a substitute and hardly seen at all around in Iceland. Gunnlaugsson seems to be pinching votes from his old party and the Independence Party.

Nine parties are or have been likely to get an MP but it now seems that in the last spurt only seven parties will be represented in Alþingi, the Icelandic Parliament.

The 2016 results

screenshot-2016-11-03-15-04-55

(Regeneration is the party I call Revival, a name the party itself uses, Viðreisn in Icelandic)

Screenshot 2017-10-26 15.58.46

A poll of polls 26 October 2017. From the left: Independence Party, Left Green, Social Democrats, Centre Party, Pirates, Progressive Party, Revival, People’s Party, other parties below the 5% threshold. From Kosningaspá.

The attraction of the new – this time it’s the new-old Centre Party

The Pirates were the stars of 2016 election though they did not make it into government. This time they are doing less well, judging from the opinion polls.

A populist party, the People’s Party, had some chance of being the new stirring choice. The party has an unclear policy except promising a lot of money for every good cause. At the very beginning it seemed it would take up the topic of immigration only to drop it very quickly. The party is now losing ground and might not even make it into Parliament.

The new political kid on the block, Gunnlaugsson’s Centre Party is doing remarkably well, showing that Gunnlaugsson has a strong appeal in spite of his Panama Papers disgrace, a story he tries to manipulate in the face of facts when he gets the chance. Gunnlaugsson is the only leader heavily playing the immigration card. This comes as no surprise, he has been dallying with the topic before but so far, it has not proved to be a winning topic.

In this respect, Iceland has so far proven to be a real exception compared to the US and most European countries. Although immigration is rising rapidly in Iceland there is plenty of work to be had, more than can be filled by only Icelanders. For years and now decades, foreigners have been crucial for the fishing industry and now they keep the tourist industry and other services going.

Gunnlaugsson has always had a populist flare, promising handouts to voters. In the election 2013 he promised to take money from the failed banks’ creditors and give to voters. The plan, introduced with fanfare in November 2013 was nothing of the sort: it was part publicly funded part funded by those who were qualified to apply.

That hasn’t stopped Gunnlaugsson from claiming he kept his promise and again he waves a bundle of money in the face of voters: he promises to give Icelanders publicly held shares in Arion Bank, seemingly similar to the Russian handout of shares in the early 1990s. The idea is to secure a spread ownership and give Icelanders shares in coming profits – an idea that doesn’t stand up to scrutiny. Gunnlaugsson has mentioned the shares will amount to ISK150.000-200.000, €1200-1600.

Topics and European thoughts

A membership of the European Union has not been on the campaign agenda. The leader of the Social Democrats Logi Einarsson has mentioned Icelanders could vote on continued membership negotiations as early as next spring. Due to lack of interest in all things European such a vote is unlikely unless the Social Democrats are in government. This got Einarsson a headline the day he said it but it is not a reverberating topic.

Revival was very much founded in order to offer conservative voters with European leanings a new option instead of the anti-EU Independence Party. However, Revival has put little emphasis on the European ticket and has been more taken up with classic Social Democratic welfare issues.

The main election issues have been welfare, health care and to some degree education as well as classic Icelandic topics such as fishing quotas and power plants versus preserving untouched nature.

Possible outcomes – again, back to the old conservative roots

With a swing from the left to the right, the outcome might be similar to last year when I pointed out that Iceland was, yet again, returning to its old conservative roots. The Independence Party has been the back-bone of Icelandic politics after World War II, left governments have been the exception, contrary to the social democratic Nordic countries (though less so the last few years: only in Sweden the social democrats are now in power).

For the time being it is very unclear what sort of government might be in sight after the elections on Saturday. Last year, it took over two months to form what eventually was the three-party coalition. It might not be much easier this time but as things stand now it is almost certain that Bjarni Benediktsson will first be given the mandate to form a government. Last year, he only managed to do it after failing the first time around and after other leaders had tried.

What sort of coalition?

There are speculations of a coalition over the political spectre, with the Independence Party and the Left Green join forces. An unpopular choice for many Left Green voters but perhaps less so if it proves to the party’s only viable path to government.

A blue-red-green government would most likely be arch-conservative, not in the sense of the Independence Party but beholden to special interests in the fishing industry, unwilling to great changes. However, as things stand now the two parties alone will not have a majority.

Benediktsson has said that he would not be keen on leading a three-party coalition. His experience as a PM has clearly not been a happy one: unable to turn the government into a good team he failed the prime minister test. His government lacked the necessary team spirit.

Will Gunnlaugsson made a come-back in government? It is uncertain that an election victory will bring the Centre Party into government because Gunnlaugsson is highly unpopular among the politicians he was in government with. He proved highly unreliable, often incommunicado for days, not showing up at the Prime Minister office, not taking the phone from his fellow ministers. And no one knew where he was. Benediktsson, who was minister of finance in the Gunnlaugsson-lead government, is rumoured to be most unwilling to repeat the experience.

Minority governments have been a rare occurrence in Iceland, not seen for decades, contrary to the other Nordic countries. A minority government will hardly come into being until all option for a majority government have been exhausted. But then, knowing the voters would appreciate it the political party may also be preparing a real surprise: a speedily formed majority government. Given the various alphabetical options, the depressing outlook is another elections in a year’s time.

Here is my overview of the results of the October 2016 elections.

Follow me on Twitter for running updates.

Written by Sigrún Davídsdóttir

October 26th, 2017 at 4:55 pm

Posted in Uncategorised

2 Responses to 'Iceland: political instability in spite of “doing it right”'

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  1. […] earlier blogs on the elections, here, here and […]

  2. […] thing” hasn’t necessarily benefited those in government since 2008 (see my pre-election blog) – and navigating the good times has never been easy in tiny Iceland. As we say in Icelandic: […]

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