Iceland has voted in its first left-wing government, a tectonic shift in the country’s political landscape fueled by last year’s economic implosion which may ultimately result in the island nation joining the European Union.
The ruling Red-Green Socialist caretaker government is expected to win 35 seats in the 66-seat parliament, a majority of four. This marks the first time a left-wing government has been voted into power in the modern history of the Althing, the longest-running democracy in the world.
Icelanders express themselves on Friedman economics
The conservative Independence Party, which has dominated the political landscape in Iceland for decades, was punished heavily for the economic meltdown. The party was projected to gain just 14 seats with less than 23 percent of the vote, down considerably from 2007. Their loss is monumental, given the ingrained allegiance many Icelanders have to this party.
In fact, so much anger has been directed at the Independence Party that approximately 10 percent of party loyalists turned in a blank vote, or “none of the above”. This was done to show their anger at the conservative establishment, but also to express the idea that all the political establishment in Iceland is to blame for the economic meltdown.
Social Democrat Prime Minister Jóhanna Sigurdardóttir claimed victory Sunday to throngs of cheering supporters. Her top priority will be to fast-track Iceland into the European Union, which is the foundation of the Social Democrat policy for economic recovery.
It is expected that Sigurdardóttir will have to find a compromise on the issue with ruling coalition partner the Left Green Movement, which has been steadfast in its opposition to joining the EU. The Left Greens have proposed several alternatives, including a monetary union with Norway.
Sigurdardóttir expects the have Iceland join the European Union within a year to 18 months, and replace the Icelandic króna with the euro in four years.
Campaign posters for The Citizen's Movement
A new political party, The Citizen’s Movement, formed in the ashes of the protests that toppled the conservative government in January, is projected to win 4 seats in parliament. This unusual victory underscores how deep the economic wounds have hit Iceland, as the party had virtually no money and was working practically on ideology alone against heavily-funded international political interests.
One aspect Icelandic politicians are seemingly unwilling to face is the inevitable increases in taxes and cuts to the country’s generous social welfare system, which, considering the magnitude of the economic catastrophe, will be massive.
“Nobody wants to mention tax rises just ahead of the elections,” said Thorolfur Matthiasson, an economics professor at the University of Iceland. “But if the budget deficit is 10 percent of GDP and the official debt is approximately what the nation can produce in one year, then the politicians will have to raise tax and reduce public spending. That’s just Economics 101.”
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With fewer than half-a-million residents, I’d offer that a more likely outcome of the depression and now collectivization of Iceland will be mass emigration.
I’m getting the feeling that we have another case of “cut-off-your-nose-to-spite-your-face”.
If Iceland joins the E.U., they’ll lose their sovereignty. If they keep on taxing the rich, keep the VAT tax, and basically suck the money out of the peoples’ pockets, they’ve deprived their country of the wealth potential the people can generate through their own free enterprise. Government doesn’t create wealth.