Iceland. The year began with loud demands for the government’s departure. The popular protests that followed the banking crisis in the fall before increased in strength in January. Unemployment rose rapidly and many Icelanders were unable to pay their home loans. Under intense pressure from violent demonstrations in Reykjavík, Prime Minister Geir Haarde decided to announce new elections. Subsequently, the coalition split between the Independence Party and the Social Democratic Alliance, and Geir Haarde filed the government’s resignation application at the end of January. The Social Democrats and the Left – The Greens decided to form a minority coalition, which was negotiated shortly.
According to countryaah, the new government was presented in early February with Social Democrat Jóhanna Sigurðardóttir as prime minister and the Left – Green Party leader Steingrímur Sigfússon as finance minister. The bourgeois Progress Party supported the Parliament. The Governor of the Central Bank and former Prime Minister Davíð Oddsson were identified as responsible for much of the deep economic crisis. The government demanded his resignation but only after a period of power struggle with Prime Minister Jóhanna Sigurðardóttir did he leave his post.
At the change of government, leadership changes in the two largest parties also followed. The Social Democratic Alliance elected Jóhanna Sigurðardóttir as new leader and the Independence Party appointed Bjarni Benediktsson as new party leader after Geir Haarde. The new left government won the new election in April and gained its own majority in the Allting with 34 of the 63 seats. The Social Democrats took 29.8 percent of the vote and the Left – Green 21.7 percent. The Independence Party lost a third of its voters and made its worst choice so far with 23.7 percent. The progress party gained 14.8 percent and the new party the Citizens’ Movement 7.2 percent.
Jóhanna Sigurðardóttir was thus able to form a new left government with her own majority. However, it immediately got into trouble with the EU issue, where the Social Democrats wanted to apply for Icelandic membership as soon as possible while the Left – Greens were opponents. In July, however, a majority in the Swedish Parliament decided on an Icelandic membership application to the EU. Several of the Left – Green members voted against. The application to the EU was submitted promptly.
But the government was already in feud with EU members Britain and the Netherlands demanding that Iceland pay compensation promised to British and Dutch bank customers, who lost savings in the Icelandic Internet bank Icesaver’s bankruptcy in 2008. The government’s proposal for a so-called Icesave law was met by protests outside Everything, where thousands of people demonstrated in a similar way to the old government.
The Icesave law would entail costs equivalent to SEK 40 billion, which would increase the state’s heavy debt burden and the already difficult financial situation for taxpayers. But the Netherlands threatened to block Iceland’s EU application and the International Monetary Fund (IMF) declared that loan disbursements to Iceland could be stopped unless Icesave was approved.
At the end of August, the law was voted on in Alltinget but with several conditions. The government received harsh criticism from the opposition, and within the Left – the Greens there were also critics. The Minister of Health resigned in protest of the law. Public opposition showed that the previously positive attitude towards the EU was changed to a majority against Icelandic EU membership. The conflict surrounding the Icesave law led to a revised proposal from the government.
At the end of December, it was approved by the Almighty with almost a majority. But the president hesitated to sign the law when close to a quarter of Icelanders called for him to veto and call for a referendum on the issue.