Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Monday, January 26, 2009

Iceland 2009: "que se vayan todos"?

by Manuel Alvarez-Rivera, Puerto Rico

Just two years after holding a parliamentary election, voters in Iceland are likely to return to the polls next May 9 for an early general election. Normally, the poll would not need to be held until 2011, but these are anything but normal times in the Nordic island nation, whose economy has been devastated by the ongoing global financial crisis.

With all of Iceland's three major banks under receivership since October; the national currency (the krona) having lost over half its value and the stock market over 90 percent of its value; inflation and unemployment on the rise; and the GDP expected to contract by ten percent this year, public discontent over the perceived mismanagement of the economy by the coalition government of Iceland's two major parties - the conservative Independence Party and the left-of-center Social Democratic Alliance - has fueled mounting protests, first on a weekly basis and more recently on a daily basis.

The protests, which have drawn crowds of up to six thousand - a respectable figure for a country with a population of just over 300,000 - had been peaceful until last week, when they suddenly turned violent. In response, Prime Minister Geir Haarde announced he would call an early election for May 9; he also indicated that he would step down due to health reasons, having been diagnosed with esophageal cancer. Prime Minister Haarde initially let it know he intended to stay in office until the early election was held, but protests continued to take place, demanding the government's immediate resignation. Minister of Business Affairs Björgvin G. Sigurðsson subsequently announced he would resign from office immediately, and Haarde's grand coalition government came apart shortly thereafter.

In many ways, the events currently taking place in Iceland are reminiscent of developments in Argentina during that country's economic meltdown in late 2001, in which increasingly intense, violent protests forced the ouster of then-president Fernando de la Rúa under the rallying cry of "¡Que se vayan todos!," or "Away with them all!" - "them" being the politicians. To be certain, voters in Argentina didn't get rid of all the incumbent elected officials, but the financial crisis of 2001-02 crushed de la Rúa's Radical Civic Union (UCR), which until then had been one of the country's major political parties, and obliterated the Radicals' allies as well. Likewise, Iceland's ruling parties may be in for a major setback in the upcoming election: opinion polls indicate that the Independence Party - which has dominated Icelandic party politics since the country severed its union with Denmark in 1944 - may lose its pre-eminent status, while support for the Alliance has fluctuated wildly, with more recent polls suggesting the party is likely to lose considerable ground as well.

The two parties that currently stand out to gain the most are the opposition Left-Green Movement - which stands to the left of the Alliance and appears set to become the largest party in the upcoming election - and the agrarian, middle-of-the road Progressive Party. The Left-Green Movement has never been in power, while the Progressives has held office frequently, most recently from 1995 to 2007 as the Independence Party's coalition partner. Meanwhile, Iceland's grass-root movements may also take part in the upcoming election, and they could find fertile ground for their agenda: according to one opinion poll, eight percent of voters would support parties other than the ones that ran in the preceding election.

At any rate, no single party is likely to gain an overall parliamentary majority under Iceland's proportional representation system (reviewed in Elections to the Icelandic Althing), and the election winner will have to find coalition partners in order to form a government. That said, it remains too early to tell what kind of government may emerge from the election, all the more so because unlike in most of the other Nordic countries, right-left coalitions such as the outgoing Independence Party-Alliance administration are a fairly common occurrence in Iceland.


Iceland President Ólafur Ragnar Grímsson has asked Social Democratic Alliance leader (and outgoing Minister for Foreign Affairs) Ingibjörg Sólrún Gísladóttir to form a minority coalition government with the Left-Green Movement, which would also be supported by the Progressive Party. However, Gísladóttir, who underwent a brain tumor operation last year, is expected to appoint Minister of Social Affairs Jóhanna Sigurðardóttir as interim prime minister. If confirmed, Sigurðardóttir - who remains highly popular - would become Iceland's first ever female premier and the world's first openly gay head of government.