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What’s next for the Icelandic government?

So the big question around here now is: What will happen to the government now that the Icesave referendum is over.

The opposition of course keeps banging about how this represents a vote of no confidence for the government and that they should resign, while Jóhanna and Steingrímur insist that they have no intention of doing so.

However, the dissent is deep and the division is wide, and all those old conflicts that were reluctantly put aside as they tried to hammer out a deal in the last couple of weeks have come into sharp focus now. It is hard to see how the governmental parties are going to continue to work together — not only on Icesave, but those myriad other issues that are so difficult.

Compounding the problem is that there does not appear to be much unity within the Left-Green party at the moment. A new faction seems to have formed there, being dubbed the “restless division”, and they are not happy about all the concessions the Left-Greens have had to make in this coalition with the Social Democrats.

So unless the government manages to tighten its ranks, it looks like we may have a political crisis on our hands. In fact, you hear more and more people calling for an extra-parliamentary government appointed by the president.

As for YT, I left all this Icekreppa talk behind this evening and went to the Nashunal Theatah to see a stage production of Oliver Twist. I had a wee patriotic lump in my throat as I marvelled at all the culture that is thriving in the midst of the kreppa and the incredibly talented people we have in this tiny village of a country. That has always amazed me, especially when I lived abroad and used to come home for visits, and it will probably never cease to amaze me. That’s certainly one thing we can be proud of.

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  • sylvia hikins March 8, 2010, 12:41 am

    I am going to be in Reykjavik at the end of this week and I am so looking forward to enjoying the talent and culture that you are so rightly proud of Alda. All the wonderful things that are being done in spite of, not because of. Hats off to the Nicelanders!
    sylvia from viking wirral

  • kevin o'connor waterford Ireland March 8, 2010, 1:06 am

    Take care Alda that this icesave thing does not turn all Icelanders into workhouse occupants who go up to the IMF and say “please sir can I have some more”.

    I wonder who starred as Fagin (Probably one of the banking wunderkids)

    Chorus “Large amounts don’t grow on trees, you have to pick a pocket or two, you have to pick a pocket or say 300,000” ha ha.

  • ILoveSkyr March 8, 2010, 2:21 am

    As an outsider and someone who represents foreign direct investment in Iceland, I think it would be a shame and a disaster if the current government collapsed. It would take Iceland’s already seriously tattered international credibility and throw it into the wood chipper.

    All things considered, Steingrimur, in particular, has proven to be a pragmatic and sensible guy (much to this capitalist’s surprise). It is easy to talk about tossing out the government and starting anew, but we need to remember that Iceland only has a smidge over 300,000 people. I don’t believe that there is the “bench depth” in Iceland to quickly bring up another more effective government, so the only real alternative seems to be the (increasingly popular) Independence Party, who were in charge in the years leading up to the collapse in the first place and bear a good deal of culpability for the country’s current woes.

    The referendum had to occur since Iceland, the British, and the Dutch couldn’t come up with a negotiated settlement in time to forestall it. Regardless, the plebiscite probably provided some catharsis for a lot of Icelandic voters. However from the perspective of doing business with the rest of the world, securing the IMF loans, and winning future private FDI and hard currency (which I believe is critical if Iceland is to revitalize itself in the next decade), it will be a disaster if the government collapses again. A collapse will only cement the perception of instability and risk in Iceland, and foreign businesses will continue to shun the country.

    I really hope that the ship stays afloat and that a negotiated settlement on Icesave is quickly secured. Iceland needs to put this behind them, not wallow around in the mud for another year as a new government struggles to form itself and get settled in.

    Afram Island!

  • Stephen Cowdery March 8, 2010, 4:45 am

    I’ve been to three plays at the National Theatre, and have been amazed (stunned in the case of Pétur Gautur) each time. If you are in Reykjavík between October and May, it is an absolute must-see!

  • goupil March 8, 2010, 8:15 am

    I have been surprised by how little medias in Britain and Europe in general have reported and analyzed what happens in Iceland.
    Lets hope that the junk rating on the Icelandic economy won’t be of consequence for Iceland and the rest.
    Yes this crisis is affecting everybody to a different extent.
    Will busyness as usual be the solution ?
    Very few are ready to tackle the necessary regulation of financial instruments and there is general confusion about any further resolution of the crucial question about how to live together with a small planet.
    So far I repair useful things and as alway scoff at advertising. 🙂

  • Peter - London March 8, 2010, 12:51 pm

    The Blob is not going away soon ..

    Iceland May Face Mid-2011 Icesave Delay, Moody’s Says
    http://www.bloomberg.com/apps/news?pid=20601087&sid=acN35zVvM0wU&pos=7

  • John March 8, 2010, 1:11 pm

    Paying the debt do not seems to be the course the Icelandic people wants http://www.visir.is/article/20090225/VIDSKIPTI07/312966741/-1
    So a referendum about taking up new loans seems to be the way for Iceland to go ?

  • The Artful Dodger March 8, 2010, 1:16 pm


    The Blob is not going away soon ..
    Iceland May Face Mid-2011 Icesave Delay, Moody’s Says

    If they downgrade Iceland then I think there will be a lot of people willing to take a bit of a gamble on Icelandic bonds (If they start yielding 10,15%); the amount of debit is relatively tiny – so easily bailout-able…

  • The Artful Dodger March 8, 2010, 8:27 pm

    I’ve been humming ‘Consider yourself’ all day long thanks to reading this post.

    My mum used to call me ‘The Artful Dodger’ after a couple of episodes at school. When I was about 7, I bought packets of ballons to school and sold the individual ballons (massive markup in unit cost), fleecing my classmates of their lunch money. My very own crash happened, when, I bought a copy of ‘The Sun’ to sell ‘looks’ at page 3. I had to go to the headmistress and my mum was called: “You are the artful dodger you are” were the words she said to me.

    Am slightly worried though, wouldn’t have thought that a Dickensian musical would be the best thing for cheering up world weary Icelanders.

  • Kt March 8, 2010, 11:49 pm

    “We’re all Icelanders, now!”

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