ICELAND’S GOVERNMENT was heading the way of its economy last night after the departure of commerce minister Bjorgvin Sigurdsson, two days after embattled prime minister Geir Haarde announced his resignation.
Three months after Iceland’s banking system collapsed, ruining the island nation’s economy, it was unclear last night whether individual resignations and early elections in May will satisfy the growing ranks of middle-class protesters on the streets of Reykjavik.
After 16 weeks of calling for the entire government to go, peaceful protests turned into a riot last week in front of the Icelandic parliament, with police deploying tear gas – an unheard-of measure in normal times.
But these are far from normal times in this island nation, where everyone is feeling the economic meltdown triggered by the collapse of the country’s debt-burdened banks.
Unemployment rose 45 per cent between November and December last year, according to new figures, while 40 per cent of Icelandic households and 70 per cent of businesses are now classed as technically bankrupt.
Inflation has hit 13 per cent and the krona has slumped to a quarter of its September value against the euro.
“People have lost trust and lost faith in the political parties and the party system,” said Ari Trausti Gudmundsson, a 60-year-old geo- scientist, at a peaceful rally on Saturday night when a record 6,000 people gathered to demand further resignations.
Yesterday morning Mr Sigurdsson said he was standing down, followed by the chairman of the financial regulator.
“The anger and distrust of the public is too deep for me to be able to regain their trust,” said Mr Sigurdsson, explaining his decision.
All eyes have shifted now to central bank governor David Oddsson. A former prime minister and one-time leader of the ruling Independence Party, Mr Oddsson is seen as a central figure in the crisis, privatising the banks while a politician and then, critics claim, ensuring limited banking oversight while head of the central bank.
After 17 years in power, the crisis is likely to decimate political support for the Independence Party, seen as an inextricable part of the tiny elite that led this country of 320,000 to financial ruin.
Opinion polls suggest that May’s election could see a dramatic swing to the left, as voters shun the privatisation and free-market economics which prevailed in the last two decades.
The Independence Party would finish second, polls suggest, behind the business-critical Left-Green alliance. Left-Green leaders have already suggested a minority administration with the Independence Party’s own coalition partner, the Social Democrats.
Left-Green leaders have also demanded the renegotiation of the terms of last November’s International Monetary Fund (IMF) loan of $827 million (€637 million) to prop up the economy, with another $1.3 billion coming in eight instalments.
One of the leading protest groups, calling itself the “Movement for a New Republic of Iceland”, has warned the IMF and neighbouring countries “that it is not in the interest of the people of Iceland that our current government receive loans from anyone”.
“It is precisely because of corruption in government and severe mismanagement of economic and monetary policy that Iceland is now in such a sad and shameful position,” the protesters say in their petition.
“A change has to be made in government to restore trust and credibility, domestically as well as internationally.”
The poor health of the Icelandic economy mirrors a run of bad health in the government.
Mr Haarde linked his early departure as prime minister on Friday to the detection of a malignant tumour in his oesophagus.
He is to head to the Netherlands for treatment, with education minister Thorgerdur Katrin Gunnarsdottir serving as prime minister in his absence.
Foreign minister Ingibjorg Solrun Gisladottir, leader of the Social Democratic Alliance, has just returned to work after receiving treatment in Sweden for a brain tumour.
Leaders of the two coalition parties met yesterday evening to discuss their future.
