Parties that Sunk Iceland Returned to Power

Iceland’s voters went to the polls Saturday, and they voted to throw out the ruling center-left coalition. That means the return of the Independence and Progressive parties to power. This center-right grouping was responsible for the banking meltdown in the country in 2008-2009. This turnaround reflects widespread frustration with the outgoing government’s failure to cope with high inflation and other economic issues. Iceland has more interesting times ahead of it.

The Independence Party secured a 26.7% share of the vote, which is good enough for 19 seats, and the Progressives also took 19 seats with 24.4% of the vote. While some analysts predicted this kind of outcome, they argued that the first-past-the-post system would put the center-right in power with a minority of the popular vote. That just isn’t so. Most voters backed the incoming government.

The reason for this was the collapse in support for the ruling Social Democratic Alliance. The 12.9% of the vote it won was about half of what is secured in the last election four years ago. It will have 9 seats in the Althing as the parliament is known locally. The Left Green party won 10.9% of the vote and 7 seats, while the Bright Future’s 8.2% was good enough for 6 seats. Rounding out the Althing membership list are the Pirates whose 5.1% of the vote got them 3 seats. They are a grouping of rather anarchic people with an interest in digital government, intellectual property issues and so on.

The result means Iceland will have a stable government, likely to survive the entire four-year term. The right in Iceland is Eurosceptic, meaning closer ties to the EU are off the table, and its membership in the European Free Trade Association [EFTA] will not turn into an EU membership application.

The right, as everywhere else, also wants to cut taxes, and whether that can alleviate the current economic headaches remains to be seen. One expects not as tax cuts without spending cuts are inflationary, and inflation is an issue in Iceland. Moreover, tax cuts with spending cuts don’t seem to have much of an impact at all.

Perhaps the biggest issue has already been settled. Back in January the EFTA court held that Iceland did not have to pay back the British and Dutch governments in a deposit insurance dispute stemming from the whole Icelandic bank meltdown. This will give the new government greater flexibility than the outgoing one. What they do with that freedom, though, is another matter.