12/05/2007 - Analysis
On 12th May next the Icelanders will be called to vote for the 63 members of their Parliament. With its 300,000 inhabitants (around 10,000 Icelanders live abroad) and independent only for the last 63 years Iceland is largely an underrated country. The general elections on 12th May 2007 are to herald the start of a new era in political circles. Indeed David Oddsson (Independence Party, SJ), Prime Minister from 1991 to 2004 then Foreign Minister, left the political arena in September 2005 to join the Central Bank of Iceland of which he is now the Chair. Another emblematic personality, Halldor Asgrimsson, former Prime Minister (2004-2006) and leader of the Progress Party (SF) from 1994 to 2006 quit his position as Head of Government on June 5th last year as a result of his party's failure to win the local elections on 27th May 2006. The departure of these two political "heavy weights" makes the upcoming general elections more uncertain than the previous elections (1991, 1994, 1999 and 2003), all won by the Independence Party.
The Icelandic Political System
Iceland has the oldest Parliament in the world. The Althing was founded in 930 forming at that time both a legislative Assembly and a court. At the end of the 12th century the Althing was no more than a simple court of justice that was abolished in 1800 and then re-instated as a consultative Assembly in 1843 by the King of Denmark. The present Althing, the only Chamber of Parliament since the disappearance of the upper chamber in 1991, has 63 members elected by proportional voting, (the Hondt method) for period that exceeds no more than four years. Each political party has to win at least 5% of the vote to be represented in Parliament. Iceland is divided into six constituencies: North-West, North-East, South, South-West, Reykjavik-South and Reykjavik-North. Each constituency elects nine representatives for the Althing. The nine remaining seats, called "equalisation seats" are distributed according to a method that takes the results of the parties nationally and the spread of their votes within the constituencies into account in order to achieve parliamentary representation that is as close to that expressed by the population as possible. Parliament has 21 women, one third of all MPs.
Five political parties are represented in the Althing at present:
- the Independence Party (SJ), a liberal group led by the present Prime Minister, Geir H. Haarde, who succeeded the former Head of Government, (1991-2004), David Oddsson on 16th October 2005 – the latter had dominated political life for the last fifteen years and had led the party to victory on four successive occasions (1991, 1995, 1999 et 2003). The SJ has 22 MPs;
- the Social Democrat Alliance (SF), the main opposition party led by Ingibjorg Solrun Gisladottir, formed in January 1999 from the merger between the Social Democrat Party and the People's Alliance and the Women's Party. It has 20 seats;
- the Progress Party (SF), a centrist agrarian party, that was the second most important in the country for many years and a member of the government coalition from 1995 on. Led by the present Industry and Trade Minister, Jon Sigurdsson who succeeded former Prime Minister Halldor Asgrimsson on 19th August 2006 has 12 MPs;
- the Red-Green Alliance (VG), an extreme leftwing party led by Steingrimur Sigfusson rallying some sympathisers of the People's Alliance who refused to merge with the Social Democrat Party; it has five seats;
- the Liberal Party (XF), that lies to the right of the political scale is led by Gudjon Kristjansson and has four seats.
The President of the Republic is elected every four years in one round by direct universal suffrage. The present President is Olafur Grimsson elected for the first time on 29th June 1996 (40.9% of the vote), re-elected on 26th June 2004 with 85.6% of the vote (participation rate: 62.5%) The President of the Republic of Iceland has little power, refraining from using all of those granted to him by the Constitution. On 2nd June 2004 Olafur Ragnar Grimsson did however used his veto against a law on the media previously approved by parliament on 25th May 2004. The presidential veto that comprised a first in the country's history left shockwaves across the island. The law on the media intended to fight against monopolies believed to restrict both economic and political consumer freedom. The President of the Republic did however recall the importance of the freedom of expression and the need for Iceland to have free media; he justified his decision by saying that the law approved by Parliament was too controversial. According to article 26 of the Constitution the text should have been submitted to referendum but it was finally abolished on 22nd July 2004.
The political and socio-economic situation in Iceland
Iceland is an exception to the rule that dictates that all countries in Northern Europe are traditionally social democratic societies. Since 1995 the country has been run by a government coalition that has rallied the Independence Party and the Progress party, led Geir H. Haarde who took over from Halldor Asgrimsson (SF) on 7th June 2006 after the failure of his party to win the local elections on 27th May 2006. During this election the Progress Party did in fact lose eleven points achieving 12% of the vote. The Independence Party came out ahead with 42% of the vote followed by the Social Democrat Alliance (30%) and the Red-Green Alliance (13%, seven points more than during the previous elections in May 2002). Following the local elections the Independence Party also regained control of the capital Reykjavik, administered by a leftwing majority since 1994, led at present by Viljhalmur Th. Vilhjamsson.
Geir H. Haarde continued with the policy established by his predecessor. After a period of strong growth (1996-2005), Iceland faced the threat two years ago of economic overheating and was confronted with dangerous imbalance, both internal and external caused by the high household demand (financed by loans) and the size of investments undertaken in the energy sector. The consequences of this situation were: the decline of investor confidence, a rise in exchange rates and an increase in inflation. So the government reacted by establishing a budgetary austerity plan which led the GDP growth that lay at 7.7% in 2004, 7.5% in 2005 down to 2.5% in 2006. For the time being the country seems to have succeeded in halting the main threats. Consumption and investment have decreased, social partners have come to an agreement on the moderation of salaries; inflation that lay at 6.8% in 2005 dropped to 3.7% in 2006 and is not forecast to rise beyond 3.8% in 2007; finally unemployment that affected 1.3% of the working population in 2006 is due to rise to 2% in 2007 and 3.3% the year after. However the government is being cautious. The International Monetary Fund advised Geir H Haarde to restrict government spending a little more. The latter announced last summer that measures would be undertaken to slow down public consumption by staggering several State investments. The temporary freezing of national, regional and local projects was decided upon. But tax reductions that were applied in January 2007 for families and those with the lowest incomes are believed to be a risk by many economists who highlight the weaknesses of the economy: high household and business debt levels, an external trade deficit and a continuing high rate of inflation. The Prime Minister however pointed out in January that a decrease in taxes was of benefit to the economy. Hence tax on company profits that decreased from 30% in 2001 to 18% brings in 34 billion crowns in comparison with only nine before. Geir H Haarde gave himself two years to put the Icelandic economy back onto the right tracks.
The electoral campaign
At the beginning of November 2006 several members of the Liberal Party criticised the government's immigration policy. They qualified the decision to open the borders up to workers from Central and Eastern Europe who joined the EU on May 1st, as a serious mistake, saying that these new immigrants would compete unfairly with Icelandic workers and that they would contribute to a rise in unemployment. The Statistics Office published figures on immigration last September. Foreign workers comprise 5.5% of all wage earners (in comparison with 2.4% in 1998). The greatest number amongst these are the Poles (1,970), then the Danes (560), Philippinos and Portuguese (510 for each), Germans (500) and finally more recently the Chinese (470).
In a country where the theme of immigration has never been used by a political party, contrary to what happened in the neighbouring states of Norway and Denmark, these ideas were the source of extremely negative reactions on the part of the other political parties as well as within the Liberal Party itself. Some sympathisers left the party; voters did not appreciate the new trend adopted by the party since according to the polls most of the liberal sympathisers intended to turn to the Independence Party. The Liberal Party is however hoping that this is just a temporary change of mood and continues to believe that most of its voters will remain loyal.
At the end of February the Red-Green Alliance held its national convention during which it recalled that it was the first party to take an interest in ecological issues and to put forward a true plan for the protection of the environment. The party also promoted its proposals with regard to economic and social issues: equality between men and women, refusal of some types of privatisation, notably those involving natural resources, new measures for the old and the handicapped and a new direction in terms of foreign policy.
On 30th September last the last 300 American soldiers stationed on Iceland at the Keflavik base left the country following a decision taken in March 2006 by the American government to repatriate all soldiers present on the island for the last fifty-five years. The bilateral defence agreement between the USA and Iceland signed in May 1951 stipulated that the USA would ensure Iceland's security. Although the Americans will remain prepared to intervene if the island is threatened it is now the Icelandic government's responsibility to take on board their country's defence. The Social Democrat opposition criticised the commitments made by the government to continue working with the USA since the leftwing party is in favour of drawing closer to the EU.
The leader of the Social Democrat Alliance, Ingibjorg Solrun Gisladottir spoke again of her desire to see Iceland launch negotiations with the EU. She is in favour of Iceland adopting the euro and repeated what had been said by Foreign Minister, Valgerdur Sverrisdottir (FF) who qualified the Icelandic crown as a "minor currency which was extremely unstable and fluctuating". The European issue is the focus of major disagreement between the opposition parties: although the Alliance Party is in favour of Iceland joining the Union the Red-Green Alliance is totally against it. This subject comprises one of the stumbling blocks preventing any possible alliance between the two parties. The issue is also dividing Icelanders: according to a poll published by the daily Bladid, half say they are in favour of adopting the European currency, the other half want to keep the crown.
Although the debate about the weaknesses of the Icelandic currency is not a new one the Central Bank of Iceland, like the European Commission spokesperson both recalled that the adoption of the euro was not foreseeable without accession to the EU. On 7th March last the Independence party and the Greens addressed a declaration to the European Committee (an institution founded in 2004 by former Prime Minister David Oddsson which aims to look into the possible advantages and disadvantages of Reykjavik joining the EU) expressing their opposition to Iceland joining the EU. The loss of their sovereignty over the 200 miles of its fishing zone, a consequence of the country joining the EU, comprises the main obstacle to Iceland's entry into the EU. The country's economy depends mainly on the sea; the fishing industry employs more than 12% of the working population and represents nearly 20% of the GDP and 54.5% of all of its exports.
Six months ago the Red-Green Alliance leader, Steingrimur Sigfusson, called on the Social Democrat Alliance to join forces with his party in view of the general elections on 12th May next. But Ingibjorg Solrun Gisladottir would like to maintain her privileged links with the Progress Party many members of which share her views on the EU. For his part Jon Sigurdsson, present Industry and Trade Minister, only just elected as head of the Progress Party (19th Augusut 2006), declared that the European issue was not on the agenda and it would be better to stabilise and strengthen Iceland's economic base before talking of any rapprochement with Brussels. Jon Sigurdsson intends to position his party on the outside of straightforward liberalism just as any socialist experiment which according to him would not be suitable in Iceland. According to some political analysts, Ingibjorg Solrun Gisladottir might be interested in forming a grand coalition with the Progress Party and the Independence Party if her party won the elections.
Two new political parties will be running in the elections on 12th May: the Fighting Union (B) and the Movement of Iceland – Land of Life. A former union that joined forces with the Union of the Capital (H) led by Arndis Björnsdottir, the Fighting Union defends the rights of the elderly and the handicapped. The Movement of Iceland-Land of Life, led by journalist Omar Ragnarsson, the Vice-President of which is a former member of the Liberal Party Margret Sverrisdottir, would like to "widen the foundations of the ecologist movement in parliament" and put an end o the present government's industrial policy. Ecological themes ranked very highly in the first weeks of the electoral campaign. During the last session in Parliament, 18 MPs, mostly members of the Red-Green Alliance signed a Pact for the Future of the country entitled "Grey or Green" in favour of a better protection of the environment and the halt on all industrial projects. Jonina Bjartmarz is the only member of the Progress party and only Minister to have signed the text that was also signed by the leader o the Social Democrat Alliance, Ingibjorg Solrun Gisladottir. Likewise at the end of March the inhabitants of Hafnarfjördur rejected by referendum (50,6%) of an extension of the aluminium foundry owned by the company Alcan.
The rise in popularity of ecologist themes can be seen in the polls where we can see a clear breakthrough on the part of the Red-Green Alliance. In the latest poll undertaken by Gallup and published on 27th March last, although the Independence Party leads with regard to voting intentions 36% (25 MPs), it is closely followed by the Red-Green Alliance, credited with 28% of the vote (17 seats). The Social Democrat Alliance is due to win 20% of the vote (13 MPs), the Progress Party is said to be declining with 9% (5 seats) and the Liberal Party is due to win 7% (3 MPs).
The retirement of two historical leaders of the parties in the present government coalition, David Oddsson and Halldor Asgrimsson, have undeniably opened the way to a remoulding of the political arena. Many alliances are possible and the electoral campaign that has just started will tell us whether the Red-Green Alliance will maintain this high tempo in the polls as other themes, such as the socio-economic ones for example, take over the debate.
Reminder of the general election results 10th May 2003:
Participation rate: 87.80%
Source Agence France Presse