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Iceland: Protests bring down government

November 19, 2011
Friday, January 30, 2009 – 11:00
By Tim Dobson

Ongoing mass demonstrations in response to a severe economic crisis has led to the collapse of the Icelandic government. Prime Minister Geir Haarde resigned on January 23 along with the whole government cabinet.

Icelandic activist Eirkur Bergmann commented on the website of the British Guardian: “The word ‘revolution’ might sound a bit of an overstatement, but given the calm temperament that usually prevails in Icelandic politics, the unfolding events represent, at the very least, a revolution in political activism.”

With the anti-government revolt growing, Haarde, leader of the right wing Independence Party, refused an offer from its coalition partner, the Social Democratic Alliance (SDA), to keep the coalition intact on the condition that they would choose a new prime minister.

By January 29, a new governing coalition had formed and Iceland’s social affairs minister, the SDA’s Johanna Sigurdardottir, was announced as the country’s interim leader until new elections are held in May.

Sigurdardottir, who will be the world’s first openly gay leader, has been installed as head of an interim centre-left coalition which includes the SDA and the Left-Green Movement (LGM).

Support for the LGM has surged in response to the widespread anti-establishment sentiment unleashed by the economic crisis.

In the 2007 elections, the LGM received 14.3% of the vote and won 9 seats in parliament.

Currently it is polling 32.6%, higher than any other
political party.

The LGM was formed in 1999, aiming to unite left-wing and green movements into one party based on four principles: conservation of the environment; equality and social justice; fair and prosperous economy; and an independent foreign policy.

The party supported the anti-government protests, opposes Icelandic entry into the European Union and supports renegotiating of the terms of a recent US$2.1 billion loan from the International Monetary Fund.

According to the January 27 Age, Lars Christensen, chief analyst at Danske Bank in Copenhagen, outlined the fears of many in the business world about the LGM becoming Iceland’s largest party: “There’s a considerable risk that a new government will be populist and interventionist.”

The collapse of the Icelandic finance sector in October last year has meant all major banks in Iceland are now under state control.

A January 26 Guardian article outlined the reasons for the sharp collapse in Iceland: “Iceland had relatively high interest rates, so investors borrowed heavily in Japanese yen and bought Icelandic bonds.

“Money flooded into Iceland and its big banks borrowed $120 billion on the international markets — six times the size of the country’s GDP. This is the sort of leverage normally associated with hedge funds, which borrow money for their speculative plays.

“The money was recycled into other European economies, including Britain where Icelandic investors bought up large parts of the high street, and all was well while the bubble continued to inflate.

“The financial crash has put paid to Iceland’s get rich quick scheme — known as the yen carry trade — and left Iceland saddled with debts it has no hope of paying without impoverishing its people for decades to come”, said the Guardian’s Larry Elliot.

Iceland has borrowed a total of $6.7 billion to prevent its whole economy form melting down. But the crisis is having a severe impact on the people of Iceland.

Unemployment, which was almost zero in September, has begun to spiral. Latest figures indicate it is now above 7%. This year the Iceland’s economy is predicted to contract by 9.6%. Inflation has now hit 18%.

The crisis has the potential to become much worse. The Irish Times reported on January 26 that 40% of Icelandic households, and up to 70% of businesses, are technically bankrupt.

The collapse of the government and the calling of new elections has been claimed as a victory for the protest movement. Two major demands of the protests were for the resignation of Haarde and for new elections to be called.

A January 27 article in the Scotsman reported: “Jubilant protesters honked horns and banged pots and pans outside
Iceland’s parliament after the news the government had fallen.”

“We are very happy and optimistic today”, playwright Snorri Hauksson told the Scotsman. “I think the public deserves a celebration but, of course, we realise that there are troubled times ahead and not all our demands have been met.”

The victory came after a 16 week long campaign. At its height, the demonstrations reached up to 10,000 in the capital Reykjavik — a sizeable turnout for a country with a population of just 320,000.

Iceland’s conservative government is the first to fall as a result of the global economic crisis. It sets an example to working people around the world — unpopular governments can be brought down by mass protest movements.

From GLW issue 781

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