Members' Research Service By / October 27, 2016

Iceland ahead of the parliamentary elections

Written by Naja Bentzen, The financial storm that swept Iceland in 2008 has had long-lasting effects on the country’s domestic…

© niyazz / Fotolia

Written by Naja Bentzen,

The financial storm that swept Iceland in 2008 has had long-lasting effects on the country’s domestic political climate. Despite the remarkably speedy economic recovery, the post-crash political crisis has continued to evolve. New, alternative political movements have mushroomed, and the anti-establishment Pirate Party is expecting a big boost in the 29 October snap elections.

Background: Boom, bust, recovery and aftermath

Ballot box with national flag on background - Iceland
© niyazz / Fotolia

After Iceland declared independence from Denmark in 1944 to become a constitutional republic, the country quickly became one of the world’s most prosperous economies. While Iceland had relied heavily on fishery, aluminium smelting and increasingly growing tourism for a long time, its banking sector expanded aggressively worldwide from 2000. By 2008, the banks had grown to ten times the GDP and 20 times the state budget. The state could not afford to bail out the banks when they collapsed the same year, sparking public protests that forced the government coalition to step down in January 2009. Iceland received US$2.1 billion in aid from the International Monetary Fund and another US$2.5 billion loan from its Nordic neighbours. Since then, it has made a remarkably swift recovery. The latest economic survey by the OSCE (2015) indicated Iceland had reached full employment, lowered its public debt and entered its fifth year of economic recovery with prospects for continuing growth. However, although the tourist industry is booming, there is concern that the economy could overheat and steer towards another slump over the next five years.

Political parties between left and right, tradition and change

Despite a quick recovery, the crash sparked a prolonged political crisis that continues to shape the public debate today. Before 2008, four established political parties dominated the political landscape. To the right, the liberal conservative Independence Party (SSF) and the agrarian Progressive Party (FSF) ruled in government coalitions from 1997-2007. The more fragmented left wing, the Social Democratic Alliance (SF) and the Left-Green Movement (VGF), formed the first centre-left government in the country’s history in 2009, reflecting the public mood of the ‘pots and pans revolution’. New political movements have since mushroomed: 10 new parties entered the political scene ahead of the 2013 general election. While SSF and FSF was able to reclaim power and form yet another centre-right coalition government, then Prime Minister Sigmundur Davíð Gunnlaugsson (FSF) had to step down in April 2016 over his ties to an offshore investment company with multimillion-pound claims on Iceland’s failed banks, revealed in the Panama Papers leak. He was the first high-ranking casualty in the global scandal that sparked mass protests in Reykjavík and mounting calls for snap elections. As a result, Icelandic voters will elect 63 members of the Althingi (established in 930 and among the oldest running national parliaments in the world) for a four-year term on 29 October.

Independence Party: Iceland’s major liberal conservative, EU-sceptic party:

Formed in 1929 when the Conservative Party and the Liberal Party merged, the Independence Party (Sjálfstæðisflokkurinn, SSF) is historically the largest united centre-right political force in the country. Its reputation was dented in the bank crash, when angry crowds forced then party leader Geir Haarde (who had formed a government coalition with the SF in 2007) to resign in January 2009. In the following snap election, the SSF became the main target of public discontent, losing more than one third of its Althingi seats, but restored some of its support in the 2013 parliamentary elections, with 26.7 % of votes and 19 Althingi seats. Despite the Panama Papers scandal, recent polls suggest some 25 % public support for SSF. Led by Bjarni Benediktsson, the eurosceptic SSF joined the Alliance of European Conservatives and Reformists in 2011.

Progressive Party: from EU-sceptic to pro-EU and back again

Founded in 1916 as a merger of two farmers’ parties, Framsóknarflokkurinn (FSF) is an agrarian-based liberal centrist, and the country’s oldest, mainstream political party. Following the crisis, the party’s stance shifted from eurosceptic to pro-EU under then Chairman and PM Gunnlaugsson. The party (with no European affiliation) has since re-adopted its eurosceptic line. FSF won 24.4 % of the 2013 vote, translated to 19 Althing seats. Incumbent PM Sigurður Ingi Jóhannsson (who succeeded Gunnlaugsson in April 2016) was elected FSF chairman on 2 October 2016, ending months of internal party turmoil, and falling public support.

Opposition: New and traditional parties

The Pirate Party: New, dominant anti-establishment force

Althingi election results, 2007-2013
Althingi election results, 2007-2013

Based on the ideologies of the Swedish Piratpartiet, Iceland’s Pirate Party (Píratar, PP) was founded by former WikiLeaks collaborator Birgitta Jónsdóttir in 2012. Píratar garnered 5 % of votes and won three Althingi seats in the 2013 election. Public support for the party (which advocates direct democracy, freedom of information and expression, asylum for US whistle-blower Edward Snowden, and has no formal stance on EU membership) has continued to grow. The PP (which has urged the Pokémon Go company to turn polling stations into Pokéstops to boost youth voter turnout) has led opinion polls for months. With some 20 % public support in recent public opinion polls, the Pirates are expected to see a massive boost on 29 October, not least because the Panama Paper leaks tainted the reputation of the established elite.

Bright Future: New pro-European, green liberal party with roots in FSF and SF

Bright Future (Björt framtíð, BF) was co-founded in 2011 by Guðmundur Steingrímsson, a former member of FSF, and Róbert Marshall from SF. The BF is pro-EU, favours adopting the euro and advocates liberal economic policies and environmental protection. BF garnered 8 % of votes and six seats in the Althingi in the 2013 election. Recent opinion polls suggest around 7 % public support for the BF. Chaired by Óttarr Proppé, the BF is a member of the Alliance of Liberals and Democrats for Europe.

A complete newcomer, the conservative pro-EU Viðreisn (Restoration) party enjoys 6.6 % public support.

Social Democratic Alliance: Pro-European, centre-left party with decreasing public support

Social Democratic Alliance (Samfylkingin, SF) was founded in 1999 when four smaller left-wing parties merged. In the 2003 general election, the SF became the second largest party with 20 seats in the Althingi. In 2008, the SF (a member of the Party of European Socialists) entered a government coalition for the first time with the SSF. Capitalising on the crash and PM Haarde’s (SSF) subsequent resignation, the SF became the country’s largest party in the 2009 snap election, securing the centre-left government coalition with VGF, led by Jóhanna Sigurðardóttir. Since then, public support for the pro-European, centre-left SF has declined significantly, and the party garnered only 12.8 % of votes in 2013, losing 10 of the 19 seats it secured in 2009. Under Oddný Harðardóttir, public support for the party dropped below 10 % in recent surveys.

Left-Green Movement: An EU-sceptic, radical and green alternative to the SF

Former members of the parties that merged in SF in 1999 formed the Left-Green Movement (Vinstrihreyfingin – Grænt framboð, VG) as a more leftist and radical alternative to the SF. The financial crisis boosted public support for the VG’s democratic socialist, feminist and EU-sceptic stance, and the party formed an interim government coalition with the SF in January 2009. Voters’ support for the VG peaked in the April 2009 snap election with 21.7% (14 seats), but was halved in 2013. Led by Katrín Jakobsdóttir, public support for the VG (a member of the Nordic Green Left Alliance) is between 1219 % in recent polls.

EU-Iceland relations: Iceland joined the European Free Trade Association in 1970 and the European Economic Area (EEA) in 1992 (the EEA Agreement entered into force in 1994). In the wake of the financial crisis, the centre-left coalition government applied for EU membership in 2009. EU accession negotiations opened in June 2010. In 2013, the new centre-right, eurosceptic coalition government suspended accession negotiations. Reykjavík reconfirmed there were no plans to join the EU in March 2015. Public support for EU membership peaked in 2008, dropping to 24 % (with 63 % against joining the bloc) in early 2013 amid the harsh IceSave dispute over British and Dutch account holders’ deposit losses in the Icelandic bank Landsbankinn crash. The European Parliament’s delegation for relations with Iceland was formed in 1987, and the EU-Iceland Joint Parliamentary Committee was established in 2010.

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