Iceland’s prime minister resigns in day of drama

Icelandic president refuses to grant Gunnlaugsson’s request to dissolve parliament

 Iceland’s president   Olafur Ragnar Grimsson    after  he denied  the prime minister’s request  to dissolve the parliament and hold snap elections. Photograph: Birgir Por Hardarson/EPA

Iceland’s president Olafur Ragnar Grimsson after he denied the prime minister’s request to dissolve the parliament and hold snap elections. Photograph: Birgir Por Hardarson/EPA

 

Iceland’s prime minister became the first casualty of the global revelations on offshore companies as he resigned yesterday. In a day of high drama in Reykjavik, Sigmundur David Gunnlaugsson first tried to hang on to his office by seeking the dissolution of parliament.

After Iceland’s president refused to grant the request, though, Mr Gunnlaugsson decided to step down as prime minister but carry on as the head of his Progressive Party. Sigurdur Ingi Johansson, the current minister of fisheries and agriculture, will become prime minister. However it remained unclear how other political parties in Iceland would react and early elections could still be called.

The Nordic island of 320,000 people has been shaken by revelations that the prime minister once owned an offshore company, now controlled by his wife. The scandal brought up to 22,000 Icelanders on to the streets of Reykjavik on Monday evening in one of the biggest protests yet seen in the country.

Mr Gunnlaugsson leads a two-party coalition government between his Progressive party and the Independence group of finance minister Bjarni Benediktsson. Mr Benediktsson, who has himself admitted to once owning part of an offshore company, has refused to give Mr Gunnlaugsson his support, admitting the government may not survive the revelations disclosed by the International Consortium of Investigative Journalists.

Mr Gunnlaugsson wrote on Facebook yesterday that if the Independence Party declined to back him, he would “break up parliament and call for early elections”. Already on Monday, councillors from his own Progressive party in Akureyri, Iceland’s second-largest town, called for Mr Gunnlaugsson to step down.

The centre-right prime minister continued to insist neither he nor his wife had done anything illegal and argued his government had helped advance Iceland.

Although Iceland’s economy has recovered strongly from the shocks of its banking system collapsing in 2008, the population remains bitterly divided, politically and socially.

The two government parties combined enjoyed less support than the anti-establishment Pirate party, according to the last polls before the revelations emerged from documents leaked from the Panamanian law firm Mossack Fonseca. “People are boiling with anger here,” said Stefan Olafsson, a professor in sociology at the University of Iceland.

Mr Gunnlaugsson is facing a no-confidence vote in parliament tomorrow, which he would lose if the Independence Party refuses to back him.

Mr Gunnlaugsson came to power promising to make the “vultures” – as he called the creditors of the failed banks – pay and use the money to reduce the burdens of Icelanders’ mortgages. However, according to the leaked documents, Wintris, the company that is now solely owned by his wife, was in turn a creditor of the failed banks, exposing the prime minister to sharp criticism and claims of a conflict of interest.– Copyright The Financial Times Ltd 2016