Iceland Votes for Stability

Politics - September 27, 2021

Over the weekend, elections were held in one of the largest countries in Europe, but also in a tiny outpost in the North Atlantic…

The federal elections in Germany on 26 September 2021 are of course the big news today. This is the most populous country in Europe, with the largest and strongest economy. Since the first federal elections in 1949, the Christian Democrats have dominated German politics, although in 1998 the Social Democrats for the first time gained more votes than their centre-right rival, while in 2002 the two major parties received exactly the same proportion of votes, 38.5 per cent. It was the cooperation between the conservative Konrad Adenauer and the liberal Ludwig Erhard which enabled Germany to recover from the Second World War. There was no economic miracle in Germany, only the predictable success of economic freedom. But there was a political miracle, the ability of conservatives and liberals to join forces. So powerful was this alliance that in 1959 the German Social Democrats abandoned the Marxist demand for public ownership of the means of production. Adenauer and Erhard oversaw the process in which the Reich became a Bund and Germany recaptured its true Western identity, which had been weakened by the Prussian defeat of Austria in 1866 and the subsequent growth of the warfare-welfare state. It is sad to see how the Christian Democrats have gradually moved away from their great heritage.

Unlikely Allies

One day earlier, Iceland held parliamentary elections in which a left-right coalition government of three parties not only survived, but in fact increased its share of the total vote. It was formed in 2017 by the popular and pragmatic Katrin Jakobsdottir, who could perhaps be described as Iceland’s answer to New Zealand’s Jacinda Ardren. Jakobsdottir leads the Left Greens, traditionally the most left-wing party in Icelandic politics, tracing its roots to the Communist Party operating between 1930 and 1938, the Socialist Unity Party of 1938–1968 and the People’s Alliance of 1968–1998. The other coalition partners are the centre-right Independence Party and the centrist rural-based Progressives. The reason why those very different parties entered a coalition was that they sensed the strong will of many voters to find stability after the political chaos following the 2008 bank collapse. Iceland was not as hard hit economically by the international financial crisis as some other European countries, but the collapse made a strong psychological impact on the Icelanders who had previously taken their prosperity and peaceful existence for granted.

These unlikely coalition partners have worked well together and delivered what the voters wanted, the stability that enabled the Icelanders to deal relatively effectively with the pandemic caused by the Wuhan virus in 2019. Opinion polls indicate that the supporters of the Independence Party and the Progressives were overwhelmingly in favour of continuing the coalition, while some Left Greens strongly opposed it, with two members of parliament leaving the party during the term. This dissatisfaction was reflected in the loss made by the Left Greens in the elections despite the popularity of their leader: they received 12.6 per cent of the votes, down by 4.3 per cent.

Iceland’s Centre Right

The Independence Party received 25.2 per cent of the votes, much more than was predicted in opinion polls, but nonetheless a loss of 0.8 per cent from the last elections. The party, long dominant in Icelandic politics, suffered a humiliating defeat in 2009, immediately after the bank collapse when it got only 23.7 per cent of the votes. Rightly or wrongly, it was widely blamed for the collapse. Thus it has now regained some ground, but it is far from being as strong as before the collapse when it sometimes enjoyed the support of more than 40 per cent of the voters. Its leader, Finance Minister Bjarni Benediktsson, has however become, with Katrin Jakobsdottir, one of Iceland’s most respected politicians although admittedly he is guilty of one almost unforgiveable sin: he comes from a prominent and wealthy family. One reason for the relatively weak performance of the Independence Party is that in 2016 it split over the European Union. The Reform Party which supports membership was founded by former party members, including a former Prime Minister, Thorsteinn Palsson. Now this party received 8.3 per cent of the votes, up by 1.6 per cent from the last elections. Nonetheless, EU membership does not seem to be on the agenda in Iceland, possibly as a consequence of Brexit. It was hardly mentioned in the election campaign. ‘You don’t board a ship on fire,’ a prominent Social Democrat, Jon B. Hannibalsson (an ardent supporter of EU membership), exclaimed.

The second-largest political party in Iceland, the Progressives, received 17.3 per cent of the votes, up by 6.6 per cent. They can therefore be regarded as the real winners of the elections, even if they scored much lower than in 2013 when they got 24.4 per cent. But their victory now was really the victory of the government as a whole because apparently many who wanted the stability provided by the coalition voted for the Progressives as the least controversial of the three coalition partners. The Progressives also seem to have regained most of the votes which they had lost in a party split in 2017 when their former leader, Sigmundur D. Gunnlaugsson, left and founded his own party. Gunnlaugsson had become popular as a result of his firm stand in a dispute between Iceland and the United Kingdom over government guarantees of bank deposits, but in 2016 he had handled allegations of corruption ineptly, although there was really no substantial case against him. Gunnlaugsson’s Centre Party now received 5.4 per cent of the votes, down by 5.5 per cent.

Iceland’s Social Democrats

The real losers of the elections were the Social Democrats. They had, in the hope of capturing votes from disgruntled former Left Green supporters, moved far to the left. But in the campaign it was revealed that their brightest star, Kristrun Frostadottir, had received hefty bonuses as the economic analyst of an investment bank. This would not necessarily be a problem for a right-wing candidate, and it certainly was no crime, but it was an embarrassment for the Social Democrats who had in the election campaign spoken loudly of soaking the rich. In the elections, the Social Democrats now attracted far less votes than their counterparts in the other Nordic countries, only 9.9 per cent, down by 2.2 per cent. By comparison, in the 2003 elections they had received 31.0 per cent of the votes, and then they had presented themselves as the main alternative to the Independence Party.

A colourful character, Gunnar S. Egilsson, seems to have stolen the Left’s thunder, although his Socialist Party, with 4.1 per cent of the votes, failed to win any parliamentary seats. A former journalist, Egilsson has been in charge of several sensationalist newspapers and magazines all of which have tumbled. In the early 2000s he was the hired gun of retail billionaire Jon A. Johannesson, the biggest debtor of the Icelandic banks before their collapse. Egilsson was generously paid and he amassed a small fortune by Icelandic standards, around five million dollars. He managed to involve Johannesson in a newspaper adventure in Denmark which ended up in a loss of at least 50 million dollars and which also significantly worsened the reputation in Denmark of the Icelandic business sector. Johannesson lost his patience and Egilsson was soon out of a job, no longer travelling around the world in Johannesson’s private jet. Undaunted, Egilsson returned to Iceland, joined the Muslim Association of Iceland for a while and later organised a bizarre project, that Iceland should seek to become the 21st province of Norway. In the election campaign he spoke like an unapologetic Leninist, threatening to fire all judges who to him seemed unduly conservative. He also promised to turn the headquarters of the Independence Party into a public lavatory, with a distinguished former Justice Minister, Bjorn Bjarnason, as the chief attendant. In the beginning of the campaign, Egilsson was treated as an entertaining diversion, but the joke soon ceased to be funny.

Two Small Left-Wing Parties

Two small opposition parties managed to have candidates elected to parliament, the People’s Party and the Pirate Party, with 8.8 and 8.6 per cent of the votes, respectively. The People’s Party is led by a pleasant elderly woman, Inga Saeland, who is given to crying in public about the plight of the poor. Unfortunately, Saeland wants to make poverty easier to endure, not easier to escape. Her main political proposal is to raise the tax-free income level with the result that most low-income people would not pay any income tax at all, and to finance this and other outlays by taxing the financially strong professional pension funds, thus transferring money to her present voters from future pensioners. Saeland’s biggest asset is however that she differs from the Social Democrats and the Socialists in that she comes across as sincere.

Unlike its counterparts in other countries, the Icelandic Pirate Party is not at all libertarian on economic affairs, although it is opposed to copyrights and patents, also favouring the decriminalisation of recreational drugs. The Pirate Party has made it the most important part of its platform to repeal the Icelandic Constitution, dating from 1874 and written in the same spirit as the constitutions of the liberal Scandinavian monarchies. It wants to replace it with a long wish list presented in 2012 by a so-called Constitutional Council, a strange amalgamation of media celebrities, busybodies, cranks and clowns. This Council had been nominated by the left-wing government of 2009–2013. Less than half the people eligible to vote had subsequently turned out for a referendum on the Council’s many recommendations, with two-thirds of them finding them acceptable, in other words just one-third of the voters. By contrast, the old Constitution, given to the Icelanders by the Danish king when Iceland was a Danish dependency, had been resoundingly reaffirmed in a referendum in 1944, with 98.5 per cent of the votes in favour, with the almost unbelievable turnout of 98.4 per cent.

What to Expect

The interesting question now is what kind of government will be formed. In the election campaign, both the Social Democrats and the Pirates ruled out cooperation with the Independence Party, thus excluding all but one possibility for themselves, a coalition of all the small parties to the left of the Independence Party, most likely under the leadership of Katrin Jakobsdottir. This would however also require the participation of the Progressives whose leader, Sigurdur I. Johannsson, might then insist on becoming Prime Minister. Such a government is rather unlikely, but it should not be ruled out.

I have no idea what the party leaders will now do, but I know what I would do if I were in the position of some of them. If I were Sigmundur D. Gunnlaugsson, I would make an offer to the Independence Party that the three members of the Centre Party’s parliamentary group would join the Independence Party with Gunnlaugsson in return becoming a government minister. If I were Bjarni Benediktsson, I would consider it an important task to try and regain the support of those who in these elections voted for the Reform Party. This could possibly be achieved by cooperating with the ‘renegades’, but also possibly by campaigning effectively against them. But Benediktsson must keep in mind the old American adage which I quoted in a television debate during the campaign: If it ain’t broke, don’t fix it. This is perhaps the strongest argument for the continuation of the present government coalition, possibly with some changes in the division of ministries between the coalition partners. There is no doubt that the Icelanders, or at least a large majority of them, crave stability.