On 28 January this year, the European Free Trade Association’s court ruled that Iceland was not obliged to reimburse Dutch and British savers who had lost money during Iceland’s financial crisis in 2008. The judgment in the Icesave case changed the course of Icelandic politics and transformed the fortunes of the centre-right Progressive Party and its leader, Sigmundur Davíð Gunnlaugsson. Within little more than a day, the party gained 10 percentage points – almost doubling its support. Three months later, Gunnlaugsson was prime minister – at 38, the youngest since the Icelandic republic was founded in 1944.
Over the years, other parties had wilted in their opposition to reimbursing foreign account holders. Gunnlaugsson had not. “The court ruling gave him credibility, which the voters may have found him to be lacking before,” says Gunnar Helgi Kristinsson, professor of political science at the University of Iceland.
On election day, 27 April, 24.4% voted for the party, a record. “Gunnlaugsson’s non-conciliatory position on Icesave was undoubtedly the major factor in the election,” Kristinsson says.
Icesave also won Gunnlaugsson an important ally, in the form of President Ólafur Ragnar Grímsson. Grímsson had been a central figure in the Icesave dispute, twice calling referendums on whether the deposits should be reimbursed. In the election, the Independence Party and the Progressive Party won the same number of seats in the Althing, the Icelandic parliament; the Independence Party won the popular vote, but the Progressives had expanded its support the most. Grímsson decided Gunnlaugsson should form the government.
This was a major achievement for Gunnlaugsson and his party. For the past two decades, the Independence Party, another centre-right party, has been the much stronger party.
Gunnlaugsson has, however, struggled in government: his party has already lost more than one-fifth of its support. A young man still relatively new to politics, Gunnlaugsson must again establish his credentials.
In his campaign to become the party’s leader in 2009, Gunnlaugsson portrayed himself as a grass-roots candidate. But he had been a card-carrying party member for only a few weeks, and his pitch was not targeted at the party’s strongholds in rural areas. He won because the party, in turmoil for three years, saw in the former TV journalist a man capable of delivering on his promise to appeal to voters in Reykjavík.
Gunnlaugsson had been well-known for fresh opinions on city planning, but, until the Icesave judgment, he had struggled to establish himself. Though his father, Gunnlaugur Sigmundsson, was a member of the Althing for the Progressive Party from 1994 to 1999, his family background also added complications. The Progressives are a liberal, socially committed party with agrarian roots. Gunnlaugsson’s family is urban and wealthy. Gunnlaugsson’s wife is the daughter of a prosperous businessman (the couple have an infant daughter), while his father’s fortune – made by buying a listed company set up by a state-owned company that he had run – has been the subject of media scrutiny.
1975: Born, Reykjavík
2005: Graduates in economics and business, University of Iceland
2009-: Member of parliament for the Progressive Party
2009-: Leader of the Progressive Party
2009-13: Member of the foreign-affairs committee
2013-: Prime minister
Gunnlaugsson compounded the doubts with vagueness about his academic record. He has a business degree from the University of Iceland, but also spent part of his long university career studying at the Plekhanov Institute in Moscow and at the University of Copenhagen. He then studied economics and political science at Oxford, but did not gain a degree.
Gunnlaugsson’s father once compared himself to a Viking. Gunnlaugsson has an altogether different public persona. A radio journalist for most of his career, his media appearance is measured and he rarely loses control. On the campaign trail, he usually deployed a strategy of vagueness, never giving entirely clear answers.
Vagueness has remained his trademark even in office. That is a tougher trick to pull off and he may discover that more clarity is needed – and perhaps that, as the Icesave case showed, clarity sometimes brings great political rewards.
In office, he has struggled, and not just in the polls. Within weeks of taking up office, the former journalist penned an article complaining of what he saw as harsh and misleading media coverage of the government’s first steps.
He has tried hard to maintain the credibility of his party’s election pledges, Kristinsson says, but his room for manoeuvre is limited by the commitment of the Independence Party, with which he is in coalition, to tax cuts and reductions in public spending.
Where he has so far particularly failed to meet voters’ expectation is in the party’s pre-election pledge to find at least 300 billion króna (€1.9bn), 17% of Iceland’s gross domestic product, to lower household debt for those who were apparently too well off to benefit from earlier debt relief.
Gunnlaugsson claimed before the election that the necessary funds could be extracted from the estates of the two failed banks, Glitnir and Kaupthing, at the expense of foreign creditors.
The Organisation for Economic Co-operation and Development and the International Monetary Fund have both warned against the planned debt relief. But in keeping with a long tradition of Icelandic politicians ignoring such warnings, Gunnlaugsson said that he did not expect such organisations to approve of what he called “the government’s radical policies” and that he would not pay much attention to the opinion of “some acronyms”.
Gunnlaugsson waves the Icelandic flag vigorously on many issues. He extols the virtues of all things Icelandic, once even dieting on Icelandic food alone, and has moved many issues related to Iceland’s national heritage from the ministry of culture to the prime minister’s office.
On European Union issues, such attitudes have translated into strong Euroscepticism. At various times from 2005 to 2009, the Progressive Party showed some interest in the EU. Under Gunnlaugsson, it has become firmly against Iceland joining the EU.
So far, Gunnlaugsson has not established how to translate this policy into action. Last year, Gunnlaugsson began advocating a referendum on whether negotiations on accession should even continue (like the Independence Party).
This put him at odds with public opinion: a majority of Icelanders want negotiations to run their course, ending with an agreement, and only then to hold a referendum. The government has, so far, only settled on a parliamentary debate following a review, due in the autumn, of the negotiations and the state of the EU.
This may not be enough for the European Commission, which has complained that Gunnlaugsson’s plans are vague. But the EU’s anxiety is unlikely to worry Gunnlaugsson. Nor is a threat raised by some EU member states – to impose sanctions in a fishing dispute – likely to trouble him greatly. He knows that one thing that unites Icelanders in the pro- and anti-EU camps is sovereignty in fisheries.