Iceland 2013

Legislative elections were held in Iceland on April 27, 2013. All 63 members of the Althing (Alþingi), Iceland’s unicameral legislature were up for reelection. The Althing is the oldest extant legislative body in the world, founded in 930. 54 seats in the Althing are ‘constituency seats’ elected in multi-member constituencies (Reykjavík North, Reykjavík South, SW, NW, NE, South) which have 9 seats except for the SW which has 11 and the NW which has 7. Voters are allowed to modify the pre-ranked list of candidates on a party list by altering the ordering or crossing out candidates which they do not like. Constituency seats are distributed to parties based on a modified version of the d’Hondt method, and parties must clear a 5% threshold nationally to qualify for seats. Nine additional seats, called ‘leveling seats’, are allocated to adjust the result to achieve some kind of proportionality at the national level (again, only parties winning over 5% nationally are eligible). The two Reykjavík constituencies and the SW have two leveling seats, the three other constituencies have only one leveling seat.

Brief primer on Icelandic politics

Iceland became a republic separate from Denmark in 1944, it had already been a sovereign state as a monarchy in a personal union with the Danish king since an Act of Union in 1918.

While Swedish, Danish and Norwegian politics have traditionally been dominated by social democratic parties, Icelandic politics since independence have been dominated by the centre-right Independence Party (Sjálfstæðisflokkurinn, IP). The Independence Party was founded in 1929 through a merger of a liberal and conservative party. By virtue of being at the forefront of the fight for independence, the IP became the dominant party in Icelandic politics after its foundation and could be called something of a ‘natural governing party’. The IP was the largest party in every single election between 1931 and 2009, and although it did not always participate in the governing coalitions during this time period, it was present in most coalitions and often held the office of Prime Minister. Unlike right-wing parties in the other Scandinavian countries, the IP does not have the ‘bourgeois party’ label attached to it and it has been able to build a broad base of support and very strong roots in Icelandic society (10% of the population are members of the party). While most of the IP’s support stems from a predominantly urban/suburban affluent and well-educated middle-class, it has traditionally maintained a respectable base of working-class support and it has been dominant with fishermen. The IP has benefited from the strong backing of the fishing lobby, large businesses and most of the private media (for example, the popular daily newspaper Morgunblaðið).

Notwithstanding its conservative orientation, the IP has accepted the creation of a welfare state comparable to the generous Scandinavian model systems found in the other Scandinavian states. The IP often prides itself with the transformation of Iceland from a poor, isolated island nation to a modern, affluent and egalitarian state (Iceland has one of the highest HDIs and one of the most egalitarian states in the world). Under Prime Minister Davíð Oddsson (1991-2004), the IP shifted to the right with an agenda of privatization, major tax cuts (abolishing the wealth tax, cut the corporate tax to 18%) and deregulation. Oddson is credited for having spurred economic growth and created a vibrant entrepreneurial climate, but since the 2008 financial crisis his deregulation policies have been criticized for having created an unrestrained climate which led to the financial collapse. Since leaving office, Davíð Oddsson has remained a very powerful actor behind the scenes. He is currently one of two editors at the Morgunblaðið newspaper.

One of the main issues in Icelandic politics has been the European Union. Iceland is a member of the European Free Trade Association (EFTA), the European Economic Area (EEA), the Schengen agreement and cooperates with the EU on a number of policy matters. However, EU membership remains a very divisive and controversial issue in Iceland. One of the main roadblocks to EU membership is Iceland’s large fishing industry, which would be subject to tough EU quotas and regulations if the country were to join the EU. The IP is strongly pro-American and pro-NATO, but it has opposed EU membership.

Traditionally, the second largest party – consistently so between 1931 and 1999 (save for 1956 and 1978) – was the Progressive Party (Framsóknarflokkurinn, PP), founded in 1916. The PP has been a junior partner in a number of IP governments (it has also governed with the centre-left, less often), most recently between 1995 and 2007, and has sometimes held the Prime Ministerial position in the IP’s stead. Described as a liberal party, the PP is a unique Scandinavian variant of liberalism – Nordic agrarianism. The PP is, at its roots, a rural farmers’ party, like the Centre parties in Sweden, Finland or Norway. In contrast to continental classical liberalism, the PP has tended to be cooler towards economic liberalization, although it was the junior partner Davíð Oddsson’s cabinets between 1995 and 2004.

The PP has traditionally been hostile towards EU membership. In 2009, it changed its position in favour of EU membership, but with so many caveats that it did not equate to much. Earlier this year, the PP once again changed its position and readopted its traditional anti-EU stance.

The Icelandic left has never achieved the level of power and political hegemony enjoyed by its sister parties in Sweden or Norway. The Icelandic left, for most of its history, was almost evenly divided between a socialist/communist party (the People’s Alliance) and a very centrist and moderate social democratic party (SDP). The left was further weakened by the emergence of small ephemeral parties, including a feminist party between 1983 and 1995 which won up to 10% of the vote at one time. Most of the left united in the Social Democratic Alliance (Samfylkingin, SDA) in 1999, initially created as an alliance of the People’s Alliance, the SDP, the Womens’ List and a SDP splitoff. The Alliance’s moderate Blairite-like platform alienated some of the more left-wing members of the former People’s Alliance who formed, that same year, the Left-Green Movement (Vinstrihreyfingin – grænt framboð, LG or VG), which is an eco-socialist party.

The SDA is perhaps the strongest supporter of EU membership to be found in Icelandic politics, with an unambiguous and longstanding stance in support of joining the EU. The Left-Greens, however, are against EU membership and are also anti-NATO (Iceland joined NATO in 1949, a decision which had sparked major protests at the time).

The Icelandic political system was turned on its head by the 2008 financial crisis.

The financial crisis and its aftermath

In the years running up to the financial collapse in the fall of 2008, Iceland had been booming economically and its rapid economic growth and concomitant rise in household incomes earned the country the moniker of “Nordic tiger” among other names. The population embraced the IP governments’ economic and fiscal policies which had allowed for the economic boom, and foreign observers such as the IMF often praised Iceland for its robust economic growth and its entrepreneurial climate.

Like in Ireland, the crisis was brought upon by the behaviour of Icelandic banks in the first decade of the twenty-first century. The country’s three largest banks had expanded dramatically, an expansion which they financed with loans on the interbank lending market and then by deposits from foreigners (notably in the UK and the Netherlands). Icelandic households also accumulated a gigantic private debt, equivalent to 213% of disposable income. These factors led to high inflation rates, exacerbated by the Central Bank’s policies (effectively printing money on demand). The crisis unfolded when the banks became unable to refinance their debts, and they were too big that the Central Bank could not act as a lender of last reserve and guarantee the payment of the debt contracted by the banks.

Within a week in late September/early October 2008, the three largest banks were either nationalized or placed on receivership as the government – a IP-SDA coalition led by IP Prime Minister Geir Haarde – struggle to prevent a situation of national bankruptcy. The crisis took on an international aspect with the collapse of Icesave, an international savings bank operating in the UK and the Netherlands as a subsidiary of the Landsbanki. As the banking system collapsed, Iceland informed Britain that the Depositors’ and Investors’ Guarantee Fund did not have the funds to repay deposit guarantees to the Icesave’s foreign customers. Britain and the Netherlands demanded that the Icelandic state should at least repay the minimum deposit guarantees. In response to Iceland’s refusal to guarantee anything, London controversially invoked anti-terrorism legislation to freeze all Icelandic bank assets in the UK.

The 2008 crisis led to a rapid devaluation of the Icelandic krónur (which had been very overvalued in the run-up to the crisis), a severe economic recession (-6.6% in 2009, -4.1% in 2010), a large increase in unemployment (from 1.6% to 8%) and the explosion of the public debt (29% in 2007, 102% in 2011). Iceland received a $5.1bn bailout from the IMF and Nordic countries in November 2008 and enforced strict capital controls which remain in place.

The financial crisis led to major political changes. Citizens were incensed by the inaction of Prime Minister Geir Haarde in the run-up to the crisis and the handling of the aftermath. There were large protests – the largest since the anti-NATO riots in 1949 – against the government in January 2009. These protests, dubbed the Kitchenware Revolution, compelled Geir Haarde and his government to resign. He was replaced by Jóhanna Sigurðardóttir, the SDA minister of social affairs and social security in the outgoing government. Jóhanna Sigurðardóttir formed an interim cabinet with the SDA and the Left-Greens.

In snap elections in April 2009, for the first time in Icelandic history, the left (SDA and LG) won an absolute majority in the Althing. The IP, which lost nearly 13% of its vote compared to the 2007 election, won its worst result ever and fell into second for the first time. A new grassroots populist movement, the Citizens’ Movement (Borgarahreyfingin) won 7% and 4 seats. Jóhanna Sigurðardóttir’s left-wing coalition (SDA and Left-Greens) was reelected.

Four years later, Iceland’s economic situation has undeniably improved significantly. While the country isn’t entirely out of the woods just yet, the economic crisis is over and there are clear signs of a healthy recovery. The economy grew by 2.9% in 2011, 1.6% in 2012 and will grow by 1.9% this year. Unemployment has fallen from a high of 8.1% in 2010 to 5% this year. The public debt, after having exploded to over 100% of GDP during the crisis, has been reduced to about 92% of the GDP and is projected to fall to 72% by 2018. Similarly, the budgetary deficit has been reduced to more healthy levels.

The left-wing government has been criticized for being too friendly to the IMF and foreign interests, not preoccupying itself enough with the country’s living conditions.

The government lost a lot of political capital with the Icesave dispute, in which it was criticized for being too accommodating with foreign countries. In November 2008, Iceland had reached a tentative understanding with the UK and the Netherlands in which it agreed to guarantee the liabilities of the Depositors’ and Investors’ Guarantee Fund, while the UK and the Netherlands agreed to lend the necessary funds to the Depositors’ and Investors’ Guarantee Fund. Bilateral agreements were reached between the three actors in June 2009, and the first Icesave bill was passed – with amendments setting a ceiling on the repayment of the loans based on the country’s GDP – by the Althing in August 2009. However, these amendments were rejected by the British and Dutch governments, forcing Reykjavík to hastily approve a second bill to which the two foreign governments did not object to. However, for the second time in Icelandic history, the President (Ólafur Ragnar Grímsson) effectively vetoed the bill by refusing to sign it and forced a referendum on the Icesave deal in March 2010. The deal was overwhelmingly rejected by a Soviet-like margin: 98% voted against the bill, only 2% voted in favour of the government’s bill.

In December 2010, after renewed negotiations, the Althing passed a third Icesave bill which had better conditions for Iceland. Once again, however, the President refused to sign the bill and it was put to the people in April 2011. Voters rejected the deal, though by a less lopsided margin: 59.8% voted against the bill.

After the failure of Icesave 3, London and The Hague decided to break off negotiations and drag Iceland to the EFTA Court to resolve the matter. On January 28, 2013, the EFTA Court cleared Iceland of all charges. It ruled that the state was not required to pay out if its deposit-insurance scheme had no money because of a banking crisis. The court’s decision was a blow to the government, which had been keen on negotiating with the UK and the Netherlands.

The government’s popularity was also hurt by the kerfuffle surrounding the constitutional convention and the proposed new constitution. The government, arguing that the country’s constitution (an amended version of an 1874 document) was archaic and had been unable to face the 2008 crisis, led the charge for the adoption of a new constitution. In November 2010, voters elected a 25-member constitutional assembly from a roster of 522 candidates. The assembly was tasked with reviewing broad areas of the constitution and come up with a new document. However, in January 2011 the Supreme Court (dominated by IP-appointed judges) invalidated the results of the election. In response, the Althing appointed the assembly’s 25 members to an alternative constitutional council which then drafted and unanimously passed a new constitution. The new constitution includes electoral reform (one nationwide constituency, in effect abolishing rural overrepresentation), national ownership of natural resources, direct democracy (referenda on bills if 10% of the electorate demands it), freedom of information and checks and balances. In an October 2012 referendum, two-thirds of voters approved the council’s draft and also voted resoundingly in favour of other key parts of the bill (electoral reform, national ownership of national resources, direct democracy).

Notwithstanding the electorate’s support for the bill, a number of politicians – most from the opposition parties (IP, PP) but also the governing SDA – started undermining the bill for a variety of reasons. The fishing lobby, for example, is not very keen on national ownership of national resources because it wants to keep fishing grounds for owners of big vessels. These MPs banded together to postpone a vote on the bill and change the rules for the adoption of a new constitution by requiring that it is supported by two-thirds of the new parliament and a popular majority representing at least 40% of the population. This deal, technically, means that the new constitution could be approved quicker (in the past, it would have needed majority support from two successive legislatures) but, in practice, it makes it tougher for it to pass. Although the constitution’s current comatose state is largely due to the IP’s opposition and sabotage, many feel as if the left-wing government could have been more forceful and pushed the constitution through. It had the votes to do so, but rural SDA parliamentarians joined the opposition in undermining the bill.

With the formation of a government led by the resolutely pro-European SDA, Reykjavík kicked off formal negotiations with the EU and became a candidate country in June 2010. 11 out of 33 acquis chapters have already been closed, and 27 remain open. The most controversial subjects – fishing quotas and whaling – have yet to be opened. There was, initially, some support for EU membership around the time of the 2008 financial crisis when some felt that Iceland would have been better off with the euro. However, with the ongoing crisis in the EU/eurozone, the mood has turned against EU membership, undermining the government’s pro-EU agenda. Many feel that the SDA wasted precious time and energy in its attempts to get Iceland to join the EU quickly.

Opponents argue that Iceland is better off outside the European Union, insulated from the Eurozone crisis. While most voters support continuing and completing negotiations, a hefty majority oppose joining the EU (only a quarter or so of voters seem pro-EU at this point).

Parties and issues

Prime Minister Jóhanna Sigurðardóttir did not run for reelection. She was replaced as SDA leader by Árni Páll Árnason, a rather stale and uncharismatic former cabinet minister. Longtime Left-Green leader Steingrímur J. Sigfússon, a senior parliamentarian, stepped down earlier this year and was replaced by Katrín Jakobsdóttir, the minister of education, science and culture. While Árnason is stale and boring, Jakobsdóttir is a pretty sharp politician whose popularity has tended to surpass that of her party.

The IP leader, like in the last election, is Bjarni Benediktsson, a fairly wealthy former businessman. Benediktsson has been compared by some local journalists to Mitt Romney, a somewhat shady businessman who was born rich and is “held hostage” by his party’s right-wing factions (in this case, the ‘Christian right’ of the IP and the low-tax/libertarian right). The IP had a wide and comfortable lead in polls until February, when the PP started surging. Prior to that point, it had up to 35-40% support in polls.

The Romney comparisons are also pretty accurate because, like Romney, Benediktsson is uninspiring to both the wider electorate and many members of his own party. Many feel that Benediktsson is too tied up to the IP’s old culture of corruption and nepotism. However, unlike Romney, those who tend to be the most queasy about him within his party are the moderates – the IP’s Europhilic moderates, alienated by the IP’s Christian conservative and libertarian right wings. He is constantly at risk of being toppled by his deputy, Hanna Birna Kristjánsdóttir, the former mayor of Reykjavík and the popular standard bearer of IP moderates. She challenged him for the party leadership in 2011 and came close to toppling him, it seems widely accepted that he would be overthrown if she feels like getting rid of him.

Indeed, on April 11, Benediktsson publicly announced that he was considering stepping down before the election. He backtracked a few days later and announced that he would stay on, as none of his leadership rivals stepped up to challenge him. This rather bizarre gamble paid off for him, since it boosted the IP’s horrible polling numbers and placed the party in a statistical tie with the PP.

The IP’s economic platform promised tax cuts and the creation of a flat tax (an unpopular stance since many feel that this would only benefit the wealthy). The IP rejects any blame for the 2008 crisis, which they say was caused by international circumstances and the worldwide banking crisis at the time.

The PP’s leader is Sigmundur Davíð Gunnlaugsson (SDG), who at 37 would be the youngest Prime Minister in Iceland. He is also the wealthiest parliamentarian in the country, having inherited his father’s wealth (his father was a prominent businessman).

The PP’s ideology is not something which is set in stone, many of its critics often attack the party for changing ideologies on a regular basis. This year, the PP had a clearly populist and nationalistic campaign, keeping in line with SDG’s tough intransigent stance on the Icesave case (he opposed reimbursing the foreigners). The party’s landmark campaign promise was writing off 20% of all price-indexed household mortgages, which would be paid by taking money from “vulture funds” (foreign creditors, claim holders). Those foreign creditors who agree to pay for this write-off would be rewarded by being allowed to move their remaining money out of the country (which they currently cannot because of capital controls).

The PP surged in polls starting in February and took a very comfortable lead over all other parties by March. However, the IP’s late surge and revelations that SDG had lied about obtaining a degree from Oxford (he attended Oxford, but never received any kind of degree) hurt the PP in the final stretch.

The past four years have seen a proliferation of new parties, oftentimes protest parties. The creation of these new parties reflect both left-wing unease and dissatisfaction with the incumbent government, judged by many on the left to be too favourable to the IMF and foreign ‘elites’; but also wider dissatisfaction with the wider political class, a lingering sentiment since the 2008 crisis. The IP and PP, the two main “old parties” from the pre-crisis political system, are still perceived as having only incompletely ‘cleaned’ themselves up since 2008. In the pre-crisis political system, the IP and the PP’s support had been maintained by corrupt clientelistic networks and inside deals.

Bright Future (Björt framtíð, BF) was founded in February 2012 by various dissident members from established parties (PP, SDA) but also Reykjavík mayor Jón Gnarr’s Best Party (a satirical party which won the 2010 local elections in the capital and has since turned ‘serious’). The BF is a social liberal and green party which supports EU and Eurozone membership. It also wants to diversify the economy, by creating industrial variety.

Dawn (Dögun) is a left-leaning party created in March 2012 from the merger of The Movement (created by 3 Citizens’ Movement MPs), the remnants of the Citizens’ Movement (4 seats in 2009) and the right-wing libertarian/populist Liberal Party (founded in 1998, 4 seats in 2003 and 2007, lost all seats in 2009). Dawn is a left-wing which supports abolishing indexation on consumer loans (mortgages), a cap on interest rates and investigations into responsibility for the 2008 crisis. It supports the new constitution and has a vague “let the people decide” stance on EU membership. Interestingly, the Liberal Party was a right-wing populist libertarian party, with an anti-immigrant twist; this direction does not seem to be reflected in Dawn.

Rainbow (Regnboginn) is an eco-socialist and Eurosceptic party which broke away from the Left-Greens in May 2013. It strongly opposes EU membership.

The Icelandic Pirate Party (Píratar) also gained significant support in polls, on a vaguely centre-left platform focusing on direct democracy, internet privacy and copyright reform.

The Households Party (Flokkur Heimilanna), founded on April 1 2012 by moderate IP dissidents, is a vaguely right-of-centre populist movement which wants to free Icelanders from ‘debt slavery’ but is otherwise vague on specifics. It supports lower taxes and increased banking regulation.

Further right, the Right-Greens (Hægri Grænir), founded in 2010, are a libertarian party focused on lower taxes (flat tax), smaller government (anti-bureaucracy) and adopting a new currency pegged to the US dollar. The ‘green’ stuff largely seems like a gimmick. Later in the campaign, the Right-Greens added a borderline xenophobic twist to its thing, talking about removing ‘undesirables’.

Democracy Watch (Lýðræðisvaktin) is a single-issue group founded in February 2013 to support the new constitution and oppose the IP’s attempts to stall/sabotage the bill.

Results

Turnout was 81.4%, down from about 85% in 2009. The results were as follows, with seat changes compared to the standings at dissolution:

Independence 26.7% (+3.3%) winning 19 seats (+3)
Progressive 24.43% (+9.6%) winning 19 seats (+10)
SDA 12.85% (-16.9%) winning 9 seats (-10)
Left-Green 10.87% (-10.8%) winning 7 seats (-4)
Bright Future 8.25% (+8.25%) winning 6 seats (+4)
Pirate Party 5.1% (+5.1%) winning 3 seats (+2)
Dawn 3.1% (+3.1%) winning 0 seats (-2)
Households Party 3.02% (+3.02%) winning 0 seats (nc)
Democracy Watch 2.46% (+2.46%) winning 0 seats (nc)
Right-Greens 1.73% (+1.73%) winning 0 seats (nc)
Rainbow 1.07% (+1.07%) winning 0 seats (+2)
All others 0.42% winning 0 seats (nc)

The IP, the old dominant party which had been kicked out of power in 2009, won the election – it won the popular vote by a bit over 2 points over the PP, although parties ended up tied in the seat count because the PP raked up seats in its overrepresented rural strongholds. Considering how bad the last months have been for the IP, it was, in that context, a good result for the party. Benediktsson’s risky gamble of putting his leadership on the line immediately before the election paid off for him. He likely calculated it as to force his internal rivals to rally around him as to avoid what would have been a very bizarre switch in leadership only weeks from the election. It was, in retrospect, a smart move by a leader trying to assert his authority over his party.

Yet, the IP’s victory is far from spectacular. Sure, it improved its standing compared to 2009 – but 2009 was an historic low for the party, a catastrophic result due to ex2ceptional circumstances. Its result this year, a bit under 27%, is the party’s second worst result after 2009 (in 1987, it won 27.2%). Benediktsson’s control of the party is still quite shaky, and the IP isn’t back to its comfortable pre-crisis standings.

The main winner in the election was the PP. The old farmers’ party roared back to old heights – winning its best result since 1979 and reclaiming the second place position it had lost in 1999 (when the left kind of united). This success wasn’t preordained – before the PP surge in the first days of February, the PP had been polling at or slightly below its 2009 result. The party’s leader Sigmundur Davíð Gunnlaugsson ran a good campaign, even if he was roughed a bit in the last few days of the campaign with criticism of the PP’s platform and the Oxford degree scandal.

The PP’s populist and nationalistic platform struck a chord with many voters. Even if the country’s economic situation is undeniably better than in 2009, many citizens are still knee-deep (or higher!) in debt (mortgages etc) and have suffered the brunt of tax hikes and spending cuts in the past four years. The PP’s appealing promise of writing off 20% of price-indexed household mortgages by taking money from the “bad guys” (foreign creditors) was popular with middle-aged home owning voters who are sitting on negative equity and big loans. Its nationalist rhetoric – blaming foreign investors and creditors for the 2008 crisis (although the PP did admit that there should have been more state regulation) – was also popular with an electorate which had very much disliked the left-wing government’s handling of the Icesave crisis with London and The Hague. The PP promised to be the party which will fight for homeowners and the regular citizens, against those who want to let the “hedge funds” decide the country’s fate.

The main loser was, clearly, the left. Both governing left-wing parties lost heavily: the SDA collapsed to a mere 12.9%, certainly some kind of historic low for the left by some standards; the Left-Greens lost over half of their vote from the 2009 election. In part, this is a restoration of “normality” – Iceland is a fundamentally and structurally conservative right-leaning country which had no experience with purely left-wing governments prior to 2009 and the crisis. The Left-Greens in particular had done extremely (abnormally) well in 2009 (21.7%) due to non-leftist voters choosing to vote for them, either because of their reputation as a ‘clean’ and untainted party or solely out of dissatisfaction with their traditional parties (read: the IP, primarily).

But this isn’t entirely a return to “normality”. Although the Icelandic left is historically weak and marginalized by the IP/PP, it has never – in my memory – been this weak (only 24% between the two governing parties). It is undeniable that the left suffered from just having the bad luck of governing a country during a period of economic turmoil. Many Icelanders are still feeling the financial pain, and they want a government which will get them out of it. But unlike Greece, Spain, Portugal or Italy – where the economy is still going down or has gone so far down that recovery is very slow, and the government obviously gets blamed for it – Iceland is no longer in that situation. The recovery from 2008 is real and probably perceptible. The economy is growing, unemployment is back down, the debt and deficits are slowly being controlled and inflation is dropping. Many observers have felt that voters in Iceland were just ungrateful on April 27: unfairly punishing a government which saved the country from economic ruin and national bankruptcy. Whether you share this view or not is subjective, but it does have some worth to it…

A rather cynical Icelandic blogger in the tabloid newspaper DV had this to say about his country:

Or as one of my colleagues put it: “America is the land of opportunities, but Iceland is the land of second opportunities.”

The small size of our population might have something to do with this. We can not afford to have people out of work, we need every able hand there is. That’s why we’re always ready to give people a second chance. We’re always willing to forgive. The Icelandic Way is such: If you mess up real bad, you just declare yourself bankrupt and get a new “kennitala” (personnummer) and then you can start all over again.

Icelandic society is like a computer game. It doesn’t matter if you lose, you just start again. You have endless “lives”. And it doesn’t matter if you’re successful or if you’re bankrupt, you will always have money. You’re always driving that fancy car, living in that fancy house. (You can see it every day on the streets of Reykjavik. People who, according to the papers, are supposed to be “bankrupt”, are all driving their black Range Rovers and wearing their fur coats to work.) If you have too much debt that you can not pay, they will just “write them off”, and then you are free to start again! And when you’re starting again and you have no money, the banks will just lend it to you. So you never have to turn in your fancy car.

Same goes for the politicians. If they mess up the economy and bankrupt the nation, they just wait four years and then they’re back in office. We are very tolerant people.

The outgoing Prime Minister said that her party had been punished because it took tough decisions. No government, especially those on the left, like raising taxes and cutting spending. Few voters like that either. The government, forced to take these tough decisions to “save” the country, was punished at the polls. Furthermore, as aforementioned, many voters – still feeling the pain – felt as if the government was too friendly to creditors and focused more on respecting the IMF’s directives.

It is also likely that the left’s vote was further hurt by Jóhanna Sigurðardóttir’s retirement. She leaves office personally popular, and the SDA’s leader has been criticized for not including her in the party’s campaign more.

The other major winner were the whole slew of new parties/protest parties. Iceland has had some strong new parties, largely grassroots populist parties, in the past; but they have never been this strong. In 2013, they won nearly 25% of the vote among themselves. This success, as aforementioned, reflects the dissatisfaction of many voters with the established parties. The incumbent left-wing government is unpopular, particularly on the left. The IP and PP are still seen by many as having only incompletely broken their ties with the past. Many critics of the IP and PP are keen on pointing out the continued influence of old party bosses – like Davíð Oddsson – within both parties, and the interconnection of the IP and the PP’s old elites.

The most successful new parties were Bright Future and the Pirates. These parties, and many of those which failed to break the threshold, largely took votes from the left. According to professor Stefan Olafsson, the right (IP and PP) lost only 8% or so of their 2009 voters while the governing left lost between 24 and 32% of their 2009 voters. About a third of 2009 LG voters supported the new parties, about 12-14% apiece for Bright Future and the Pirates. About a quarter or so of SDA voters supported new parties, including many for parties who were below the threshold. The governing parties were unable to convince voters that they should not “waste” their votes on parties which never had a chance of crossing the threshold. If the 2009 left-wing vote had been less dispersed, they would have done much better.

The results reflected the usual urban-rural split in Icelandic politics. The IP won the two Reykjavík constituencies (23% and 27% in the north and south respectively) and the suburban/exurban Southwest (30%). The SDA, Bright Future and Pirates also had predominantly urban support. In contrast, the PP won roughly similar numbers in the three rural constituencies (NW, NE, South) with roughly 35% of the vote in each. PP did rather decently in the urban and suburban areas, though: 16% in Reykjavík and 21.5% in the SW.

Aftermath

President Ólafur Ragnar Grímsson charged PP leader Sigmundur Davíð Gunnlaugsson rather than IP leader Bjarni Benediktsson to form a government after the election. All parties except the Pirates and IP recommended that the President appoint SGD to form a government rather than Benediktsson, even if the IP claimed that it should have the first shot because it won the popular vote.

The coalition option which most people are talking about is a “conservative” and traditional coalition between IP and PP, with either Benediktsson or SDG as Prime Minister or switching Prime Ministers halfway through. The PP will have a very tough time accepting an IP-PP coalition under IP leadership, given that it would send back to their traditional junior partner role under IP control. It is thus unlikely that Benediktsson would be allowed to become Prime Minister with an IP-PP government, given that the PP is in a strong position to veto this option and Benediktsson would be a very weak Prime Minister with only partial authority over his party. It is possible that the IP and PP could agree to switching Prime Ministers halfway through the four year term, but that too seems unlikely. 

An IP-PP government led by Sigmundur Davíð Gunnlaugsson would be more acceptable to the PP. Both parties are Eurosceptic and are not keen on the new constitution (the IP opposes it outright, many PPers are queasy about it). However, the IP will have a tough time accepting the PP’s populist agenda – SDG has said that the mortgage debt write-offs is a non-negotiable point for the PP in coalition negotiations, and the PP doesn’t seem like one to support the IP’s current low taxes/flat tax agenda right now. Early negotiations between the IP and the PP do not seem off to a promising start, and SDG has not really indicated that governing with his IP is his first preference.

The other option at this point involves the PP forming a more centrist or centre-left coalition. It could form a coalition with the SDA and Bright Future, in which the PP could probably have the enviable role of “unifier” in the coalition. The main issues is that both SDA and BF are pretty clearly pro-EU, and could insist on continuing negotiations as a precondition for any coalition – but the PP wouldn’t have much to lose, as it could be sure that the electorate would probably reject the EU in a referendum. The other issue is that the PP might find the SDA too friendly with investors for its tastes, but who says the PP can’t tame the populism down a bit?

A more unlikely option is a coalition with the PP, Left Greens and SDA. I’m not sure if the LGs or SDAs are hot on entering another government at this point, and the PP would probably not want to govern in such a left-leaning option.

There is some talk of the IP courting the SDA and BF to form an anti-PP coalition. This still appears rather unlikely, and it could be tactical stuff coming from the IP as it tries to get into government somehow – preferably with Benediktsson as Prime Minister. But if this is actually serious, the SDA could be in a kingmaker position at this point.

Minority governments are unusual in Iceland, but there has some talk of a PP minority government receiving external support from the centre-left BF and SDA. The Pirates, the only party which has ruled out participating in government, apparently favour a PP minority – could they even provide external support for such an option?

If the PP’s SDG becomes Prime Minister, which is probably the likeliest scenario at this point, what kind of direction would this mean for Iceland?

With any IP-PP coalition, talks with the EU are probably dead for the time being, and even in a more pro-European setup with the SDA and BF, it is very unlikely that they will go anywhere.

The core of the PP’s platform in this election was economic populism and soft nationalism. Some think that this is only the PP’s latest gimmick to win votes, but SDG does seem pretty honest and genuine. The main point of the PP’s platform, which the PP is setting as a precondition for any government, is the pledge to write off 20% of household loans/mortgages. This plank worked wonders for the PP in the election, but the party will have a very tough time actually living up to its voters’ expectations on that issue. Many economists doubt the foreign creditors will accept the PP’s “blackmail”, and even if the PP somehow did manage to get them to accept this deal, economists say that the plan would be an economic disaster for the country: either the banks would get rich again, or the consumers would have government money in their pockets – and this would lead to either inflation or another housing bubble. Many voters likely backed the PP because of this key promise, if it fails to deliver on it, it could probably face bleaker days in four years time. Many voters could be badly disappointed by the PP.

A lot of observers are cynical or pessimistic about a PP government. The blogger, quoted above, had this to say about the PP: “at the moment, the biggest political party in Iceland, is the good old Farmer’s Party, Fremskridtspartiet, the former hotbed of criminal corruption, criminal provinciality and criminal stupidity. And this fact of course, really makes you want to shout.”

If Bjarni Benediktsson fails to become Prime Minister, his days at the head of the party are probably counted. He would be the only IP leader in the party’s history who did not become Prime Minister. Hanna Birna Kristjánsdóttir, very popular both within the IP and with the broader electorate, could be plotting Benediktsson’s ouster and her accession to the party’s leadership.

Iceland may be on the road to economic recovery, but Icelandic politics have not really “recovered” from the 2008 crisis and collapse yet. Icelandic politics, despite the appearances, remains in a state of flux in which few voters trust their politicians and the established political parties. The 2009 election was an exceptional election born out of exceptional circumstances. The 2013 election is probably not a return to “normality”, but another ‘deviating’ election from the pre-crisis norm. Will Iceland ever return, however, to the pre-crisis political system? Has the crisis irremediably changed the country’s politics for good?