Michael de Laine

Iceland can expect new coalition government

By Michael de Laine, Copenhagen, 31st January 2009

Iceland is expected to announce the formation of a new coalition government this weekend, led by Jóhanna Sigurdardóttir, a Social Democrat. The leader of the Left-Green Movement, Steingrímur F Sigfússon, is expected to be Minister of Finance, and the liberal Progressive Party is expected to support the government.

Sigurdardóttir is one of the country’s most popular politicians and, in this event, will be the first female prime minister in the history of Iceland.

A member of the Alting, the Icelandic parliament, since 1978, she was Minister of Social Affairs in the Haarde government, which resigned on Monday 26th January.

Sigurdardóttir also said that the new government will be historical as there will be equal numbers of male and female ministers.
The coming prime minister is also a pioneer in herself, as she will be the world’s first openly homosexual head of government.

Gylfi Magnússon, associate professor of economics at the University of Iceland, has reportedly accepted an offer from the Social Democrats and the Left-Greens to become Iceland’s next minister of business affairs.

The two parties see a need to increase public trust in the ministry, since the minister of business affairs is in charge of the Financial Supervisory Authority (FME) and banking matters.

Both parties emphasize that the executive system of the Central Bank should be changed and that the current board of governors, with Davíd Oddsson as chairman, be suspended.

Prime minister Geir H Haarde said on Monday that the government coalition between the Independence Party and the Social Democrats had been terminated. He said he was dissatisfied with the termination of the coalition, adding that his fears that a cabinet crisis would be added to Iceland’s economic and currency crisis had materialized.

Haarde said he believed that a national government would probably be the best solution to run the country until the upcoming elections in spring and that it was natural for the largest political party — the Independence Party according to the results of the 2007 elections — to lead in such a government.

He criticized the Social Democrats, saying the party was falling apart and that it had in fact become three political parties. The prime minister said the Social Democrats had lacked the strength to complete their coalition with the Independence Party in the conventional manner.

The primary issue now is for Icelanders not to lose their focus and further credibility abroad and that the country’s political parties reach an agreement on how the country be governed in a responsible manner until after the spring elections.

One of the major problems facing Iceland is it currency – the value of the Icelandic krona has plummeted in recent months as the country’s economy fell apart. Two solutions are proposed – joining the Euro zone, including an application to join the European Union, and close currency collaboration with Norway, which is not a member of the European Union but – together with Iceland - is associated with the EU through membership of the European Economic Area (EEA).

Sigfússon spoke to the Norwegian press on 29th January about a possible currency co-operation with Norway. The prospective Minister of Finance prefers this solution to membership of the EU with transition to the Euro.

The discussion for and against the EU is one of the major disputes between the two future government parties, with the Social Democrats being the warmest supporters of EU membership.

The Social Democrat’s official policy has been generally favourable towards Iceland’s application the EU, while the Left-Greens have remained opposed to EU membership throughout the crisis. If the EU matter is put to national referendum, recent polling data indicates that the vote would be very close.

Capacent Gallup’s poll from January 18 shows that 38.3 percent of Icelanders would like to Iceland join the EU while 37.7 percent are against membership.