Iceland

Not-so-nice land

Street protesters, furious about the economy, topple the government of Iceland

ICELAND was the first economy to come close to collapse because of the global financial crisis. Barely four months later, as a result of the ensuing chaos, its government is the first to be driven out of office by popular protests.

A growing rumble of popular anger, echoing loudly in a normally close-knit country of only around 310,000 people, has at last forced the conservative government of Geir Haarde, the prime minister, to give up its hold on power. On Monday January 26th as the ruling coalition disintegrated, Mr Haarde handed his own resignation and that of his cabinet to Olafur Grimsson, the president. It was accepted, Mr Haarde’s spokesman said, although the cabinet will stay on until a new government is formed.

Popular pressure brought the government down. Since the collapse of the currency in October and amid a banking crisis that has saddled many Icelanders with unpayable debts (and cost many foreigners their savings), thousands of people, mainly left-wingers, had gathered each week to vent their anger. Some threw eggs and toilet paper. Occasionally there were stand-offs with riot police.

As winter deepened and more people lost their jobs, polls showed a growing opposition to Mr Haarde’s Independence Party and rising support for the Left-Green Movement, whose members helped to organise the egg-chuckers. Over the weekend the Social Democrats, junior coalition partners to the Independence Party, sought to bolster their support by replacing Mr Haarde with a prime minister of their own. When the Independence Party rejected this, the coalition fractured.

A change of government is unlikely to satisfy the protesters, nor will it automatically solve any of Iceland’s numerous problems. Demonstrators also want the scalp of David Oddsson, the governor-in-chief of the central bank and a former prime minister. He was responsible for many of the free-market reforms that put Iceland onto a path of breakneck prosperity in the 1990s. When the banks that he privatised collapsed, he got much of the blame.

If the Left-Greens become part of a coalition government one of their trickiest tasks will be dealing with the IMF, which has begun a $2.1 billion bail-out programme. During protest rallies they have called vaguely for a renegotiation of the stand-by agreement, although many Icelanders fear that such a move would further destabilise the economy. They also oppose the idea that Iceland might now try to join the European Union—another avenue that some have proposed as a means to escaping the crisis. However, their leader reportedly says that he will take no rash decisions if his party rises to power.

Events in Iceland may send a shiver through other parts of Europe where unpopular leaders worry about political instability. No other country’s economy has been battered quite as badly as Iceland’s by the financial crisis, but as the economic slump deepens elsewhere, popular anger rises. In parts of eastern Europe—notably in Latvia and Lithuania—demonstrators have taken to the streets recently and some protests have turned violent. In Greece, the Czech Republic, Hungary and Bulgaria financial anxiety has encouraged street protests too.

Observers in Iceland say one of the troubling aspects of their country’s crisis is disenchantment with politicians of all stripes. “Nobody is very excited to have a different government. There is a huge loss of confidence in politicians as a whole,” says Egill Helgason, the host of a popular political television show in Iceland. In this case, too, anger is tempered by sympathy for two individuals at the centre of the upheavals. Mr Haarde revealed recently that he has cancer, and intends to leave politics for good. The leader of the other coalition partner, Ingibjorg Gisladottir, has a benign brain tumour, which prevents her from taking over from Mr Haarde.