From Iceland — The Unraveling Of A Government: The Panama Papers And Iceland

The Unraveling Of A Government: The Panama Papers And Iceland

Published April 8, 2016

The Unraveling Of A Government: The Panama Papers And Iceland
Andie Sophia Fontaine
Photo by
Hörður Sveinsson

In March, Anna Sigurlaug Pálsdóttir, the wife of (now former) Prime Minister Sigmundur Davíð Gunnlaugsson, posted a status update on Facebook that seemed to come out of nowhere. In that post, she went into some detail about a company called Wintris Inc. Located in the British Virgin Islands, this company was owned by her, and was tasked with managing the assets she received as an inheritance. Why she made this post would come to light a couple weeks later, with a remarkable investigative news broadcast that would end up unseating Sigmundur Davíð and, at the time of this writing, possibly dissolving Parliament altogether.

The news that the Prime Minister’s wife had an offshore company was galling to many Icelanders, and not just because of the obvious conflict of interest. Sigmundur Davíð rose to power as a self-appointed crusader for the Icelandic króna. He talked a lot about the importance of staying out of the EU. He called the króna “the strongest indexed currency in the world.” He presided over capital controls, touted the importance of keeping business in Iceland, and railed against the claimants on Iceland’s fallen banks as “vultures” while neglecting to mention that Wintris, his wife’s own company, was one of the vultures in question.

This prompted some of the usual: protests planned, a petition in circulation calling for his resignation, his assurances that he did nothing wrong. It seemed like just yet another road bump on Highway Sigmundur, and that it might even blow over in a couple days. That all changed on April 3.

That evening, thousands of Icelanders tuned in to public broadcasting station RÚV to watch a special edition of the investigative news show ‘Kastljós’. While we knew that the programme was going to concern Sigmundur’s offshore banking activities, no one was prepared for what the show revealed. But what the concerted efforts of German newspaper Sueddeutsche Zeitung, the International Consortium of Investigative Journalism (ICIJ) and Reykjavík Media would reveal to the nation—and the world at large—sparked possibly the largest protest demonstration in Icelandic history, and the unraveling of the ruling coalition of the Progressive Party and the Independence Party.

As I write this, the man who was Prime Minister on Monday is today on his way out of that office, to be replaced by one of his own. Maybe. We’ll get to that later.

Investigative journalism, live on TV

The nation watched as the show revealed that some 2 terrabytes of data—the largest leak of its kind in history—from Mossack Fonseca, a Panamanian offshore provider, has implicated powerful figures from around the world in the use of tax shelters, letterbox companies and offshore accounts to conceal or obfuscate their financial activities. Amongst these people were at least three Icelandic government ministers, including the PM, at least three former and current members of Reykjavík City Council, and hundreds of other Icelanders.

Things came to a dramatic head when footage of an interview the Prime Minister took with Swedish television company SVT was aired. This footage, which has circled the globe, shows the Prime Minister being asked some pointed questions about tax shelters and the people who use them. Once SVT was joined by Icelandic journalist Jóhannes Kr. Kristjansson of Reykjavík Media, Sigmundur’s attitude went from wary to outright defensive, accusing the two journalists of ambushing him and declaring that he had nothing to hide even as he walked out of the interview.

The video went viral. Numerous international news outlets picked up on it. Even Edward Snowden commented on it. By Monday morning there were few people in the country who hadn’t seen it. The rumblings of mass discontent began. Overnight, thousands more had signed the petition calling for his resignation, and hundreds more joined the ranks of those intending to join the day’s protests. Now we all knew why Sigmundur’s wife had made that Facebook post: a disastrous interview, which his assistants demanded never be aired, and which he apparently never even mentioned to other members of his own party.

This could have been Sigmundur’s moment to step aside gracefully, with dignity. Instead, he appeared before the nation on live television to apologise for his behaviour during the interview, repeating the mantra that he had done nothing wrong, and that he wasn’t even considering resigning.

Firing a shotgun in an avalanche zone

This statement did not have the effect the Prime Minister was probably hoping for. Instead of putting himself in a safer position, Sigmundur had effectively fired a shotgun in an avalanche zone.

Five hours later, some 23,000 people had converged on Parliament, an Icelandic record, demanding his resignation and new elections. Just to give you a sense of scale, bear in mind that Iceland is a country of about 320,000 people. Monday’s protests were the equivalent of some 2.3 million people protesting outside the US Congress. In fact, so much debris was hurled at the parliamentary building—eggs, skyr, toilet paper and bananas all went flying—that Members of Parliament reportedly had difficulty seeing the thousands of angry Icelanders outside their windows.

The protests even took the police by surprise. They had failed to close off Pósthússtræti, the street which roughly flanks the west side of Parliament, and cars were trapped in the incoming sea of people. Drivers gave up, abandoning their cars. The crowd swelled, spilling into adjoining streets. Fireworks were set off. This was all starting to look very familiar.

Instead of putting himself in a safer position, Sigmundur has effectively fired a shotgun in an avalanche zone.

As late afternoon became evening, 2009 was very much on everyone’s minds. Icelanders speculated, in the bars and cafés around downtown, in their homes and on the streets, whether we had just witnessed the first day of another popular movement—barely seven years after the previous one—that would once again break the ruling coalition and force early elections. By all accounts this was a safe bet to make, and still is. But nothing prepared us for what would happen on Tuesday.

Who the hell is the Prime Minister?

That morning, the Prime Minister—following in the footsteps of his wife—turned to Facebook to speak to the general public, expressing the desire to dissolve Parliament and get early elections underway. There was much rejoicing. The Prime Minister then went directly to the residence of President Ólafur Ragnar Grímsson, who had just come home that morning, having cut short his personal business in the US. After 40 minutes, the Prime Minister emerged, only to quickly duck into his car and get whisked away with barely a word to the press who were waiting outside. That was the first sign that something was amiss in this whole dissolution of Parliament/early elections thing.

The second sign was when the President called for a press conference shortly after the meeting. There, he informed reporters that the Prime Minister had contacted him personally, asking for a meeting. He said the Prime Minister brought his dissolution and early elections idea to the President, and asked the head of state to make it official. The President, however, refused, saying that he needed to see a “strong level of support” from both parties in the ruling coalition to dissolve Parliament.

It turned out that the Prime Minister had, apparently, not even discussed his plan with members of his own party. They then held an informal meeting to discuss matters—without him. Hours later, a story broke that swept international headlines: the Prime Minister was going to resign. True to fashion, Sigmundur would end up scuttling his own chances to exit with dignity.

First, there was the fact that there was not even to be a change of which party would hold the Prime Minister’s office, let alone parliamentary dissolution and early elections—the coalition would hold, with the Progressives at the helm. Second, the Progressives decided party vice chairperson and Minister of Agriculture and Fisheries Sigurður Ingi Jóhannsson was to be the new Prime Minister, with Sigmundur continuing on as Progressive Party chairperson. If the Progressives were deliberately trying to pick the least suitable candidate for the job, they succeeded. In the wake of the Wintris news, Sigurður had been very diligent about defending not just the Prime Minister but also offshore accounts themselves, telling reporters that “it is complicated to have money in Iceland.” A poll taken the month before on trust in different government ministers showed that only 3% of respondents had any confidence in the man at all.

Understandably, the opposition was far from assuaged by this move. They said they were going to continue to push for dissolution and early elections, and protests continued for a second day. Later that evening, Sigmundur would once again inadvertently make matters much worse for himself than they ever needed to be.

Richard Milne, a journalist for the Financial Times in the Nordic and Baltic countries, took to Twitter that evening to post a screenshot of a press release Sigmundur’s office had sent the international media. In this press release, the office emphasised that Sigurður would only be taking over “for an unspecified amount of time,” and that “The Prime Minister has not resigned.”

When news of this reached Iceland, all hell broke loose, and the Progressive spin machine was fired up once again. Sigmundur’s assistant, Jóhannes Þór Skúlason, told reporters that “an unspecified amount of time” could very well mean until new elections are held. Other MPs for the Progressive Party attempted to pretend that the whole thing was a big misunderstanding; that he really was leaving, kind of, or taking a break anyway, maybe to return; that “The Prime Minister has not resigned” was an easy-to-misunderstand statement, and it should nonetheless be clear that Sigmundur is no longer Prime Minister. In a way.

As I write this, on Wednesday morning, the opposition is still planning on pushing for dissolution and early elections. The Icelandic people are still planning on holding another round of protests a few hours from now. And all of this has distinct shades of 2009, on which we would do well to reflect in order to understand what may happen next.

Learn from history

We should remember why the government fell apart seven years ago. Parliamentary protests were an almost daily occurrence months in a row. The Independence Party, which was leading the government with the Social Democrats, was plummeting in support. The two parties met to discuss the matter, with the Social Democrats proposing that they switch who controlled the Prime Minister’s seat. The Independence Party refused. As a result, the coalition broke. The President was obliged to form an emergency opposition coalition—comprised of the Social Democrats, the Left-Greens and the Progressives—until such time as early elections could be held.

This is important to have in mind as we follow how the Progressives and the Independence Party deal not only with this crisis, but with each other. Since this story broke, they have been speaking to each other primarily through the media. Which is never a good sign. The Independence Party may be just as corrupt as the Progressives, but they have some degree of political savviness. The same cannot be said of the Progressives.

Numerous media sources around the world have contacted the Grapevine over the past couple days to understand better why everyone is so angry. I’ve been telling reporters that the reason why the people want new elections, now, is not just because the Prime Minister might have broken the law. It’s not just because the Prime Minister is a demonstrable hypocrite who imposes economic policies on the country that he doesn’t even abide himself. It’s also because these past 72 hours have encapsulated everything that is wrong with the political system in Iceland itself—that a group of wealthy people can insulate themselves from reality, ignore and dismiss criticism, accuse their detractors of making personal attacks, and still somehow manage to cling to power, no matter how universally despised they are.

Things are still very uncertain in Iceland, and the future of its government even more so. The only thing that is certain is that the Icelandic people want this government gone, and they want the chance to vote for a new one, soon. But if the Panama Papers have demonstrated anything, it’s that the global political system is woefully broken and corrupt. If we mean to fix things here at home, we should bear in mind that simply electing new players is not going to be enough to fix things. We need a new system altogether. What form it would or could take is up for debate, but one thing is clear: changing the players does not change the game. Whether or not the rich and powerful will continue to get away with the activities the Panama Papers have revealed is up to us.

For more on this story, check out the Panama Papers tag on

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