Iceland’s embattled prime minister caused fresh consternation Tuesday night by insisting that he had not resigned following revelations about his ties to offshore companies but had merely stepped aside for an “unspecified amount of time”.
Sigmundur David Gunnlaugsson became the first political casualty of the sprawling Panama Papers tax scandal after the disclosures drew more than 20,000 demonstrators to Reykjavik calling for his resignation.
For the second time in a decade, the island of just 320,000 people has become the centre of global attention over financial excesses, even as it remains deeply divided over the collapse of its banks in 2008.
“This is the second phase. The first phase was the practical part of clearing up after a massive banking failure. What we are looking at now is the bankruptcy of politics and certain politicians,” said Huginn Thorsteinsson, a leftwing political consultant.
After the details of Mr Gunnlaugsson’s ties were published, he at first tried to hold on to the premiership by seeking the dissolution of parliament. But after the president refused to grant the request, government ministers said he would step down as prime minister but carry on as the head of his centre-right Progressive party.
Mr Gunnlaugsson later denied that he had formally proposed a dissolution of parliament, in effect accusing the president of lying. Then a government spokesman denied that Mr Gunnlaugsson had in fact resigned, saying that he had merely asked Sigurdur Ingi Johannsson, the minister of fisheries and agriculture, to take over as prime minister temporarily.
The claim by the spokesman, sent in an email to foreign journalists, set up another day of political drama.
With his resignation Mr Gunnlaugsson became the second centre-right prime minister in Iceland to be forced out in recent years by popular protest after the so-called pots and pans revolt of 2009 led to the resignation of Geir Haarde and the formation of the country’s first left wing government.
The current two-party coalition plans to continue in government ahead of scheduled elections next year, but this could spark a popular outcry. On Monday evening as many as 22,000 people took to the streets of Reykjavik — more than during the 2008-09 financial crisis — to protest at Mr Gunnlaugsson’s alleged conduct.
“It is causing huge anger in the Iceland because of the connotations with the banks in the past,” Mr Thorsteinsson said.
Opposition parties on Tuesday called for new elections, saying the public no longer trusted the government. “I believe that the issue is so serious that the people should have an opportunity to elect a new parliament,” said Katrin Jakobsdottir, leader of the Left-Green Movement.
Mr Gunnlaugsson once owned part of an offshore company, now controlled by his wife, that owned claims in the three Icelandic banks that collapsed in 2008, roiling the country’s financial and political systems.
Although Iceland’s economy has recovered strongly since the crisis, it remains deeply divided politically and socially with low trust ratings for politicians and the parliament. The anti-establishment Pirate party topped opinion polls before the offshore revelations, scoring more than the two government parties combined.
“The protests probably won’t stop until there are new elections. What they are asking for is a complete makeover of politics,” said Mr Thorsteinsson, an adviser to the previous 2009-13 centre-left government.
Mr Gunnlaugsson won his 2013 election campaign and based his subsequent premiership on promises to punish the creditors of Iceland’s failed banks and use the money he extracted from them to reduce the large household debt that built up in Iceland both before and after the crisis.
He also halted the previous government’s negotiations to join the EU and committed himself to the Icelandic krona by attempting to lift capital controls.
