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The Decline and Fall of the Icelandic Republic**

by Norwegian Chef Sat Jun 10th, 2006 at 03:39:02 AM EST

While quiet, little Iceland is normally not a major newsmaker, this has been a very bad few weeks in the nation's history.

The Prime Minister Halldór Ásgrímsson resigned only 2 years into his term plunging Iceland and his ruling Progressive Party into a major political crisis.  The Foreign Minister Geir Haarde of the Eurosceptic Independence Party has had to step in as Caretaker Prime Minister.

**From the front page - whataboutbob


It all started in May with the release of the increasingly bad inflation figure of 7.6% that had been building up over the last year.  This in turn led to a rise in interest rates by three-quarters of a point to 12.25 per cent. This in turn prompted Standard and Poor's to revise their assessment of Iceland's economic situation to negative.  On the basis of this  Ásgrímsson's Progressive Party, one of the partners in Iceland's coalition government, did poorly in Reykjavik's municipal elections on May 27, winning only one seat.  Another complicating factor was Asgrimsson and his Progressive Party's increasing support for Iceland to join the EU.  This has proven to be widely unpopular in both rural areas and also surprisingly in the capital Reykjavik.

This bad election result was the last straw that resulted in Ásgrímsson's resignation.  This whole mess in turn has led to a 2% overall fall of the value of the krona (30% fall against the Euro) and an 18% decline in the stock market.  Now the coalition of the pro-European Progressives and Eurosceptic Independents are desperately trying to gain the upper hand in the situation.  However, there seems to be an internal struggle in the Progressive Party between  current vice-chairman, Gudni Ágústsson and former vice-chairman Finnur Ingólfsson.

A good economic assessment from MSNBC can be found here.

Anyway the stage is now set for a midsummer full of unusually high political and economic intrigue for normally calm and placid Iceland.  For example, the tenure of the previous Prime Minister David Oddsson lasted for 13 years making him then Europe's longest-serving prime minister.  

Let us hope that our good friends in Iceland pull out of their tailspin.  For I would hazard to guess that the collapse of a leading indicator of tranquility as Iceland, would unfortunately confirm what so many of us have been feeling in the last few years--that the world is certainly doomed!

Oh well, as they say in Reykjavik, "In Cod We Trust".

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I had heard about this the other day, so appreciate your posting more details on this story...thanks!

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Wed Jun 7th, 2006 at 08:03:30 AM EST
Could you briefly sum up Iceland's political parties (including those in opposition), describing their ideological outlook?

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Jun 7th, 2006 at 08:15:00 AM EST
The best information on Iceland's political parties can be found on Wikipedia here .

I like the silence of a church, before the service begins better than any preaching. ~Ralph Waldo Emerson
by Norwegian Chef (hephaestion@surfbirder.com) on Wed Jun 7th, 2006 at 08:30:14 AM EST
[ Parent ]
Yes, but it's not short... and I don't know the relative wheights of the parties in government and opposition (in polls now).

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Jun 7th, 2006 at 09:01:51 AM EST
[ Parent ]
Parties currently represented in Althing

Coalition parties

Progressive Party (Framsóknarflokkurinn), leaderless, 12 seats

Independence Party (Sjálfstæðisflokkurinn), led by Care Taker Prime Minister Geir Haarde, 22 Seats

Total 34 Seats

Opposition parties

Alliance (Samfylkingin), led by Ingibjörg Sólrún Gísladóttir, 20 seats

Left-Green Movement (Vinstrihreyfingin - grænt framboð), led by Steingrímur J. Sigfússon,  5 seats

Liberal Party (Frjálslyndi flokkurinn), led by Guðjón A. Kristjánsson, 4 seats

Total 29 Seats

I like the silence of a church, before the service begins better than any preaching. ~Ralph Waldo Emerson

by Norwegian Chef (hephaestion@surfbirder.com) on Wed Jun 7th, 2006 at 09:13:37 AM EST
[ Parent ]
What I gather: the Progressives (20 seats) are liberals with agrarian roots, the Independence Party (22 seats) is conservative-liberal, and strangely pro-NATO but anti-EU. No info on the economic outlook of either.

In opposition are the Liberal Party (4 seats), which strangely enough broke off the Independence Party and is said to be social-liberal; the Alliance (12 seats), who are Social Democrats with a Bliarite platform, but no word in Wiki about position on the EU; and the Left-Green Movement (5 seats), which contains anti-Bliarite breakaways of the former, and is Eurosceptic like much of the Scandinavian hard left.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Wed Jun 7th, 2006 at 09:10:11 AM EST
[ Parent ]
Your synopsis is ok, but your numbers are a bit out.  The latest party numbers for the Althing can be found here.

I like the silence of a church, before the service begins better than any preaching. ~Ralph Waldo Emerson
by Norwegian Chef (hephaestion@surfbirder.com) on Wed Jun 7th, 2006 at 09:20:22 AM EST
[ Parent ]
I just confused Alliance and Progressive numbers.

Now my question is, who rides higher in current opinion polls (and in those municipal elections that caused the resignation), and who is down?

And regarding what the Wiki doesn't say, if you can tell us from other sources - economic positions, and Alliance's position on the EU?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Wed Jun 7th, 2006 at 10:15:23 AM EST
[ Parent ]
From Iceland Review
05/29/2006 | 15:15

Progressive Party looses votes in local election
Coverage of the local elections held Saturday dominates the Icelandic media today.

According to Morgunbladid, the Independence Party received 42 per cent of the overall votes in the local elections last Saturday compared to 41 per cent in the last elections. 30 per cent voted for the Social Democrats compared to 31 per cent last time around. The Left-Greens received 13 per cent of the votes, a gain of 6 per cent since the last local elections. The Progressive Party polled at 12 per cent, down from 23 per cent from the last elections in 2002. And the Liberals gained 3 per cent, receiving 9 per cent of the votes.

In Reykjavík, the Independence Party secured 7 out of 15 seats on the city council. According to various sources, including Morgunbladid and the Icelandic National Broadcasting Service, RÚV, they are now negotiating with the Liberals to form a majority in Reykjavík.

Morgunbladid writes that the results "confirm the crisis that the [Progressive] Party has faced over the past quarters". The Progressive Party has "become a symbol for the so-called heavy industry policy that has admittedly secured low unemployment and high economic growth but is quite controversial because of the effects of hydroelectric dams and industrial plants on the environment".

In response to the results of the elections, the vice-chairman of the Progressives, Gudni Ágústsson, Minister of Agriculture, said to RÚV that the parliamentary opposition had "persecuted" his party and that media coverage of the Progressives had been "unfair".



I like the silence of a church, before the service begins better than any preaching. ~Ralph Waldo Emerson
by Norwegian Chef (hephaestion@surfbirder.com) on Wed Jun 7th, 2006 at 05:27:47 PM EST
[ Parent ]
Is this not just politics as usual, rather than a major constitutional crisis?

From the description of the parties there seems to be more instability in political alignments than in the past, which may make governments shorter lived than Icelanders may currently expect, but it would have to get far worse before major constitutional changes would be necessary.

Irrelevant personal note - my grandfather was sent to Iceland in the Second World War, as part of a British garrison. This was one of the most forgotten aspects of the war.

by Gary J on Wed Jun 7th, 2006 at 01:38:21 PM EST
Methinks it's not constitutional but economic crisis.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Jun 7th, 2006 at 01:43:09 PM EST
[ Parent ]
From Iceland Review Online

06/07/2006 | 17:12

Iceland's current account deficit doubles year over year
According to new figures released yesterday by the Central Bank of Iceland, Sedlabanki, Iceland's current account deficit in the first quarter of 2006 was ISK 66 billion, about twice as high as in 2005 when it measured at ISK 33 billion.

The largest contribution was from the deficit on the merchandise goods account, ISK 32 billion, followed by the income account deficit at ISK 19 billion.

Exports increased by 0.8 per cent year over year, and imports by 23.9 per cent.

Inflation in Iceland now measures at 7.6 per cent.

Statistics Iceland will publish the quarterly national accounts on June 13, including the latest figures for the GDP.

Iceland's GDP in 2005 was ISK 996 billion, which puts the first quarter's current account deficit at 26 per cent on an annual basis.

On Monday, the ratings agency Standard and Poor's  revised its outlook for Iceland to negative "on hard landing risk".



I like the silence of a church, before the service begins better than any preaching. ~Ralph Waldo Emerson
by Norwegian Chef (hephaestion@surfbirder.com) on Wed Jun 7th, 2006 at 06:29:33 PM EST
The fact that the American forces in Iceland began withdrawing earlier this year probably hasn't helped the economic situation either.

http://icelandreview.com/icelandreview/search/news/Default.asp?ew_0_a_id=191234

In a country of 300.000 people, the removal of an american presence of a couple of thousand people, along with their funding, is bound to leave a gap.

http://en.wikipedia.org/wiki/Icelandic_Defence_Force

by Trond Ove on Thu Jun 8th, 2006 at 09:07:44 AM EST


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