Iceland review - 2015, Page 60

58 ICELAND REVIEW
ed, reaching its lowest point in December
2008, when it scored 4.9 percent in opinion
polls.
At least the Independence Party received
25.7 percent support in that same poll in
December 2008, but it’s still a far cry from
the between 35 and 40 percent it often
received in elections in the past decades.
Historically Iceland’s biggest political party,
it has struggled to regain its former glory.
But back to the Progressive Party. How
do you get from 4.9 percent support in late
2008 to supplying the prime minister in a
coalition of equals with the Independence
Party five years later?
The party responded to its troubles with
a complete overhaul and choosing a new
leader, a youthful former TV host—at 38,
Sigmundur Davíð became the youngest
PM in the history of the Republic of Iceland
and also the youngest ruling democratical-
ly-elected state leader in the world—who
made the mother of all election promises.
He declared that if elected he would hand
around ISK 300 billion (USD 2.25 billion)
to the nation.
The money was to come from foreign
vulture funds which were the biggest own-
ers of claims on the fallen Icelandic banks.
Most Icelandic mortgages are still linked to
inflation, and since prices shot up following
the collapse of the Icelandic króna in 2008,
outstanding mortgage loans rose accord-
ingly. The argument was that those who
benefited from the rise in inflation were
the banks, with two out of three owned by
foreign vulture funds, and those who lost
out were ordinary homeowners. Therefore,
the money should be taken from the own-
ers of the banks and handed over to the
homeowners, he argued.
At the end of 2014, the government
announced its household debt relief plan.
The actual amount handed out was sub-
stantially lower than promised—around
ISK 80 billion—and, in the first instance
at least, came from tax receipts rather than
vulture funds. Critics pointed out that this
single largest transfer of public funds in
recent history did not necessarily go to
those who needed it most. A large portion
benefited middle-aged people who weren’t
in dire need of help to pay their mortgages,
and anyway, since house prices had risen
above inflation, 2008 homeowners were
in fact better off economically, despite the
rise in inflation. So the prime minister did
do what he said he would do, albeit on a
smaller scale, but his party continued to
lose support in the polls. It was almost as
if its voters were confirming that they were
mercenaries: “I will vote for you to get the
money, but then I’ll move on.”
THE DREADED EU
Another issue the government struggled to
deal with was the question of Iceland’s pos-
sible membership of the European Union.
It inherited from its predecessor an appli-
cation for EU membership which had been
launched at the instigation of the Social
Democrats, with its coalition partner in the
last government, the Left-Greens, going
along with it, grudgingly. The Progressive
and Independence Parties were both against
membership, but prior to the election lead-
ers of both parties had promised a national
referendum on whether to continue nego-
tiations. Independence Party chair, Finance
Minister Bjarni Benediktsson, argued that
before voting on membership, it was nec-
essary to conduct negotiations in order to
see what concessions the EU was willing
to make on Iceland’s special requirements,
especially regarding the common fisheries
policy. The referendum could take place
alongside local municipal elections in 2014,
he suggested in March 2013. Since a small
majority of the population was against EU
membership, but a larger majority was in
favor of being offered a vote on whether
to continue negotiations, it would have
seemed natural to schedule the referendum,
carry on negotiations, and then either let
talks drag on or see membership rejected.
It therefore surprised and caused furor
among MPs when the foreign minister,
Gunnar Bragi Sveinsson of the Progressives,
proposed in parliament that negotiations
with the EU should be called off—without
consulting voters. He ended up beating a
hasty retreat. That was not the end of it,
however. In March this year, he sent a letter
to the EU. According to Gunnar Bragi, the
letter requested that Iceland no longer be
considered an EU applicant country. The
European Commission however said the
letter did not equal withdrawal from the
application process.
There ensued weeks of furious debate
over the meaning of the letter and the
status of Iceland’s application. Critics also
argued that there was no need to with-
draw the application. The EU has stated
that new countries beyond those already
in discussions will not be admitted, and
Iceland would have been better off putting
its application on ice.
A LIVING WAGE
The first half of the government’s life has
been dogged by wage disputes. The situa-
tion in the labor markets has not been as
uncertain for decades. Doctors went on
strike in 2014 and ended up with substan-
tial wage increases, inciting others to follow
suit. Earlier this year nurses and govern-
ment employees went on strike and others
have announced plans for industrial action.
The national hospital has been paralyzed
by the action and nurses have rejected an
offer of an almost-20-percent increase over
four years. Minister of Health Kristján
Þór Júlíusson of the Independence Party
has kept a low profile throughout, but the
finance minister has reacted harshly to the
nurses’ demands, accusing them of using
resignations and threats to leave for the
greener pastures of Norway as a bargaining
tool. There is still a great deal of uncertain-
ty about the situation in the labor market
and the effects possible wage increases will
have on inflation. Even though salaries in
Iceland have increased around 100 percent
in the last decade, real wages have only
risen by 9 percent when taking account of
inflation.
WE NEED TO TALK ABOUT TOURISM
Then there is the issue of Iceland’s capacity
to handle the tourism boom. Last year for-
eign visitors reached the one million mark,
twice as many as in 2010, and the numbers
are expected to continue to grow. Despite
the increase, there has been no clear plan
by authorities to build the necessary infra-
structure to receive this number of guests,
or how to pay for the walkways, parking
spaces and toilet facilities. Or indeed, and
OPINION