Icelandic Althing election 2016

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Representatives of the five opposition parties met today, and then discussed with their party groups. They will meet again tomorrow to agree whether to start formal coalition talks, but everone sounded positive (incl. Viðreisn). Katrín will have to report back to the president in the beginning of next week. Tax policy looks to be the biggest stumbling block.

They have to agree during the next week if they want to present their own budget. Otherwise the new government will have to "waste" a year without being able to fully set their own course, which would be problematic given voter expectations.

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Within LG the left wing would rather work with PP than Viðreisn and the more eurosceptic MPs (incl. Katrín's predecessor as chairman) would prefer a grand coalition with IP, but a poll showed she has the vast majority of party members and voters behind her in pursuing the "united opposition" option.

Its a bit ironic that both the "red" part of LG and the IP right wing would rather work with each other than the Liberal centrists, but such is Icelandic politics.

LG's main predecessor the People's Alliance historically prefered working with PP to the SocDems (both nationalist, anti-NATO, protectionist and with a substantial rural vote), so there is a historical precedence and the old guard feels more comfortable with PP than the "neo-liberals" in Viðreisn.

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The five opposition parties have now agreed to start formal coalition talks - to be completed in a week (or fail..). Lots of positive talk from the parties, but its going to be complicated.

[Deleted]

Update on the negotiations:

The parties have agreed to make massive investments in healthcare the primary priority of a new government. The main problems are taxes, where LG want to introduce a wealth tax, and increasee taxes on capital gains and high incomes, whereas Vidreisn want lower income taxes; and fishing quotas where the Pirates, Viðreisn and BF want a fully auctioned based allocation of fishing quotas, whereas LG want reserved quotas for small fishing communities and a more gradual transfer to a market based system for the rest. A compromise will need to provide enough revenue for investments in healthcare, edcation, infrastructure and commiuncation, and if not all fishing quotas are auctioned off this revenue will have to be found elsewhere as the parties agree that Icelandic society and welfare needs to be upgraded after the crisis.
LG can not accept a quota system that leads to loss of quotas for even more small fishing ports and further rural depopulation, so Viðreisn will likely need to accept some kind of tax hikes. Perhaps an entrance fee for airline passengers or tourist tax (a slower growth in tourism will keep the value of the krona down, which is necessary for the export industries, so some kind of policies that creates a better balance between the tourist sector and the rest of the economy will be on the agenda anyway). 

Four cross-party committees have been formed on:

- economy, healthcare and welfare
- education and labour market
- environment
- constitution, equality and international affairs

There are no party leaders in any of them - so clear distinction between general negotiations by the party leaders and more technical detail agreements.

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The Pirates have given up their (frankly ridiculous..) demand that MPs can not be members of the cabinet without leaving the Althing. With more than 60% of opposition MPs being newly elected that would drain the parliamentary groups of experience. Their MP Ásta Guðrún Helgadóttir called the demand “absurd”, which is bound to provoke the fundis. The Pirates will still demand their own MPs step down.

Getting two ministeries with only four MPs is a coup for BF, but they have a central position as the kit between LG and Viðreisn. LG has a significant advantage when it comes to cabinet experience as they have three former ministers, Viðreisn and SDA have one each, whereas BF and the Pirates have none. I expect all five former ministers to be in the new government - four of them are women, and as the second BF minister will also be a woman (Óttar Proppé being their only male MP) the government will likely have a 50/50 gender distribution. The Pirates will probably be represented by their co-founder Smári McCarthy and the high school teacher and historian Einar Brynjólfsson from Akureyri, who has been part of all their negotiations delegations (a level headed, pragmatic northerner).

Likely cabinet members (ex-ministers bolded):

LG: PM Katrín Jakobsdóttir, Svandís Svavarsdóttir, Steingrímur J. Sigfússon
Pirates: Smári McCarthy, Einar Brynjólfsson
Viðreisn: Benedikt Jóhannesson, Þorgerður Katrín Gunnarsdóttir
BF: Óttarr Proppé, Björt Ólafsdóttir
SDA: Oddný G. Harðardóttir

If this is the result I would say it would a significantly more talented government than the outgoing, coalition where especially the PP members tended to be sub-standard.

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A temporary budget has been prepared by the Ministry of Finance, but it has some room for new initiatives. 

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The Pirates are holding a "general meeting" on Friday and the fundis under former PM Helgi Hrafn Gunnarsson will try to prevent the reversal of the "no sitting MPs in government" policy. 

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Katrín Jakobsdóttir has given up on forming the five party majority government, but has not relinquished the mandate, as the president has asked her to "sleep on it" and report back tomorrow. She does not want to say which parties declined to participate in the government, but most likely either Viðreisn or the Pirates.

The parties had more or less agreed on a compromise regarding fishing quotas, but since the former government has spend far more on infrastructure investments in the final months before the election (essentially "pork") than expected there was a larger fiscal gap to be filled and that may have made a compromise on taxes between LG and Viðreisn too hard. Another difficulty was that Viðreisn - unlike the other four parties - only wanted gradual step by step revisions of the constitution, rather than a fundamental rewrite based on the draft by the Constitutional Council. This was an issue where the Pirate negotiators had limited room to compromise.

There are now only three options left:

- LG, IP and a third party, most likely BF. This will be easier with Katrín Jakobsdóttir as PM as it to some degree allows LG/BF to balance IP (14/21).
- LG, PP, SDA, Pirates (not a majority, but only lacks one seat and BF would be "friendly opposition" on most issues - uncertain if PP will accept the Pirates, and vice versa).
- New elections - possibly with a caretaker government during the winter (winter elections and costly and cumbersome).

The two Liberal europhile parties can not join a government with PP in it. LG would probably win a new election, which will influence their decision. If Viðreisn has "overplayed their hand" for the second time, that would normally hurt them.

 

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The Pirates say it wasn't them that blocked the negotiations. They say that there was "consensus on their main priorities" in the negotiations:

"The process for the introduction of a new constitution has been well received. There was consensus on the distribution of dividends from natural resources and no one set themselves against the restoration of healthcare, the promotion of public participation in decision-making, tackling corruption and (measures to) restore confidence in Parliament."

If accurate that only leaves taxes as the breaking point, and Viðreisn as the nay-sayers. 

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SDA leader Logi Már Ein­ars­son says Benedikt Jóhannesson was the one who ended the negotiations. He says that a decent consensus and compromises had been reached on most major issues, but that they never came around to discuss revenue. He is "somewhat surprised" that Benedikt Jóhannesson chose to terminate the negotiations so soon.

Viðreisn says that given especially LGs ambitions for tax rises they thought it was "most honest" to leave the negotiations before they became formalized. 

It seems Benedikt Jóhannesson keeps behaving like a political amateur (which he is, but he has highly experienced Þorgerður Katrín Gunnarsdóttir in his group, but apparently her position isn't strong internally).

Ótt­arr Proppé will discuss with his parliamentary group whether to keep the alliance with Viðreisn­.

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Most likely LG will now try negotiating with PP instead of just handing back the mandate. When he was elected chairman Sigurður Ingi Jóhannsson said that PP under his leadership would be "an egalitarian party" (using a historic term from the farmers movement that literally means an "equality party"), implying they would break with the more right wing line under SDG. SDG now seems to be completely isolated, and it would be a significant triumph for the party to remain in government.

PP and LG could probably agree on the main issues.

- Neither of them are interested in an EU referendum, but PP has opened up for taking one on the actual membership if need be (given current polling that seems risk free), but not on resuming negotiations. This might be necessary if SDA and Pirates should join them. It would of course be a bit strange with an EU referendum where both the major government parties (incl. the PM and Foreign Minister) campaigned for a "No", but stranger things have happened in Icelandic politics.

- PP doesn't owe Big Fishing anything, so like LG they could settle for reserved quotas for rural communties and let the rest be auctioned off.

- PP doesn't rule out a new constitution, but can of course not accept eliminating rural overrepresentation in the Althing, or make land based natural resources public property, but would likely be okay with declaring all fish stocks "property of the nation".

- In their usual populist tradition PP has promised tax cuts to people with middle incomes and free dentistry for old age pensioners as their "election gifts", so these demands come on top of all the rest. They agree on massive healthcare investments. Even with an auctioned based system for 70-80% of the fishing quotas there would need to be an element of "tax the rich" in an LG/PP deal, but SIJ likely wouldn't mind that. The question is whether the SDG loyalists would object (SDG would of course..). But there is a strong desire to "move on" from the chairmanship election and project unity.

- there shouldn't be any major infrastructure projects the greenies and resource extracting lobby can quarrel over, and SIJ would likely be prepared to cave on this issue - preparing to get the ring road paved and single lane bridges replaced (something LG supports). The only other big infrastructure project is the centre-lefts desire for a new domestic airport in Reykjavík (to make room for housing), where PP want to keep the current one (to avoid the risk that patients from the province can not be flown in to Keflavik in very specific wind directions). But this could probably just be postponed, even if the centre-left in Reykjavík (and the SDA mayor) would hate it.

- both parties would like the present protectionist status quo on agriculture upheld, but the question is if potential coalition partners can live with that. the EU has demanded Iceland quit their ban on import of fresh meat (defended by reference to the risk of importing animal diseases), as it breaches the EEA agreement, so at least that issue needs to be dealt with.

So on constitution, EU, fisheries, agriculture, healtcare and potentially taxes the two parties should be able to find compromises, the big question is whether their potential partners can accept those compromises, as well as working with a party that still has SDG as an MP. And has a fair share of corrupt members, though apart from SDG none of the current MPs afaik. Would certainly be hard for the Pirates.

[Deleted]

One option I didn't mention - and perhaps the simplest - is a four party minority government of LG, Pirates, SDA, and BF with passive support from Viðreisn, which could block tax increases they can not accept, and leave it to PP to negotiate about  

IP/PP is two seats bigger, but the centre-left would likely block it on important issues (a continuity government is seen as unacceptable because of the Panama Papers affair), leaving it at the mercy of Viðreisn, whereas the centre-left have more options. 

The president will at some point have to decide if he can accept a minority government. Alternatively the parties can establish one on their own and present it in parliament, but that is very unlikely.

The extra costs due to the last minutes "gifts" by the current government is 19 billion ISK, and will leave a deficit if not financed. Katrín Jakobsdóttir and Bjarni Ben are currently arguing over whether he tried to camouflage these extra costs. 

If the president continues to allocate the mandate after the size of the parties, the next up are... the Pirate Party, which haven't ruled out trying to form a centrist government. Though I suppose he would try to avoid that. 

[lennon]

Just a note to say a massive thanks for your continued description of the detailed talks and positioning that's ongoing - it is much appreciated.

On a quick question - what's the (fundi) Pirate logic to saying that you can't be in the Althing if you are a Minister - presumably fundamental separation of powers logic (the Executive should be separate from the Parliament). Is there any precedence for it - have Ministers in the past occasionally given up their Althing seats or is it totally new?

[Deleted]

Nov 24, 2016 12:25:14 GMT lennon said:

Just a note to say a massive thanks for your continued description of the detailed talks and positioning that's ongoing - it is much appreciated.

On a quick question - what's the (fundi) Pirate logic to saying that you can't be in the Althing if you are a Minister - presumably fundamental separation of powers logic (the Executive should be separate from the Parliament). Is there any precedence for it - have Ministers in the past occasionally given up their Althing seats or is it totally new?

Yes, they want a clear separation of the executive and the legislature. There has been near consensus on this among the Pirates. A general meeting approved it by 115-8. It is just that the pragmatic left wing around Smári McCarthy and Birgitta Jónsdóttir are prepared to compromise on this for the time being to get a "reform government". Whereas the new politics fundamentalists, who are usually economically liberal, see it as an unacceptable sell out. Basically I see it as a divide between those who want the party to be a (greenish and socially liberal) centre-left party with some special issues on technology, direct democracy, transparency etc. and those who see a new way of doing politics as the essence of the party. So its the reverse of fx. the German Greens (and most protest parties) that the "right wing" is the most principled. 
 
In the other Nordic countries ministers usually give up their seats in parliament when they enter cabinet (but are not obliged to), simply to get more active MPs. There is no tradition for this in Iceland, but I can not say whether it has happened a few times in the past. The small size of the political talent pool makes it risky to drain the parliamentary groups of ministers, and with the bulk of the opposition party MPs being new that concern is even more pertinent. 

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Katrín Jakobsdóttir decided to keep the mandate after consultations with the president, but the LG, Pirates, PP, SDA option is already dead in the water as the Pirates refuse to collaborate with PP, and PP have "not expressed interest in such a partnership". So the majority options not involving an LG/IP grand coalition (and apart from the 1st government of the republic 1944-46 there has never been a coalition between IP and the "far left") are running out. She meets the president again tomorrow and the question is if he will authorize an attempt at forming a minority government. 

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Katrín J. handed back the mandate this morning. The president has decided not to appoint a new leader of the negotiations, but let the party leaders negotiate informally over the weekend. The Pirates had wanted the mandate in order to try reinvigorating the five party government talks with "a new approach", and it would be hard for the president to choose between them and Viðreisn as neither party have much chance of forming a government, and the most realistic majority options all include IP and LG working together. 

He says the time hasn't yet come for considering a minority government, but the talks over the weekend are probably the last chance to avoid it, and definitely the last chance to avoid the Althing having to vote on the preliminary budget. 

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Turns out Katrín Jakobsdóttir did approach Bjarni Benediktsson with a coalition offer when she had the mandate. He was positive about trying to build a coalition with LG, but only if the third parner was PP (a "eurosceptic protectionists united"). This is a no-go for LG because it would marginalize them, and be viewed as a continuation of the previous government (and a validation of the corruption and nepotism by some of its members). LG can only accept SDA or BF as the third wheel in order to shift the internal balance to the left. SDA declared before the election they would not support an IP government (but so did LG..), and BF are reluctant to break their alliance with Viðreisn.

Some media talk about LGs parliamentary group unilaterally changing the joint committee document on fishing during the five party negotiations and this leading to distrust from the other parties, but this has been denied by key players in the opposition parties. SDA claim that taxes wasn't "the real reason" Benedikt Jóhannesson left the negotiations - and that he should tell the public why.

The Pirates general meeting have agreed to hold a membership referendum on waiving the "no sitting MPs in cabinet" for their potential coalition partners. 

There doesn't really seem to be any feasible majority options left and I expect the president to accept a minority government fairly soon. Unless the internal pressure from protectionists and "lets solve the big issues and move on" pragmatists in IP can pressure/persuade Bjarni Ben to accept a coalition with the left. IP/LG/SDA is the most likely majority option by now (and not all that likely...).

The acting PM has declared that the Althing will have to meet no later than 6 December to either pass a preliminary budget, or an emergency law allowing wages and payments to be made until a budget is passed.

[Crimson King]

I just wanted to say that I am following this, even if there is no way I can possibly contribute

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Bene­dikt Jó­hann­es­son, Bjarni Bene­dikts­son and Ótt­arr Proppé have met over the weekend and according to the Icelandic press they are close to an agreement about opening formal government negotiations. It seems that Bjarni Ben now prefers working with the Liberals as a coalition with LG will include a europhile, anti-protectionist party anyway. Viðreisn may also be more accommodating now that they have found out how (small c-) conservative LG are on fishing. This was reportedly the "real reason" why Viðreisn withdrew from the five party negotiations as LG's tax policies were well-known in advance and detailed talks about fiscal matters were never instigated. 

Another factor is that IP and BF are running a number of municipalities together and this experience has led the moderate suburban wing of IP (which is Bjarrni Ben's base) to see BF as an attractive partner. 

Though with the way this has played out nothing is certain yet. 

[Georg Ebner]

Would kill BF, wouldn't it?!

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Nov 27, 2016 19:06:52 GMT Georg Ebner said:

Would kill BF, wouldn't it?!

Not sure, I initially thought so because of the sharp internal critique, but it may actually be more likely to kill off Viðreisn. Breaking with IP only to become their junior partner is a risky move. Regarding BF it depends what they get out of a deal with IP, if they get an EU negotiations referendum, a test quota for mackerels and the start of a free market agricultural policy (no import bans, lower tarifs, breaking up the milk monopoly and some plan for future liberalization of the sector), then they might be able to sell it as a victory. The IP/BF alliance in suburban municipalities hasn't harmed them. They might lose some members among Reykjavík hipsters, but not necessarily voters.

There is a (mainly well-educated, urban and middle class) europhile and Social Liberal voter segment that can go either SDA, BF or Viðreisn, but not really anywhere else, and its hard to see SDA coming back from the hole they have dug themselves in (at least with Reykjavík voters, they currently have no MPs from the capital region), so the other two parties can not both crash at the same time (unless Reykjavík mayor Dagur B. Eggertsson decides not only to start his own centrist party, but go national with it, but I think he is satisfied with being mayor - and might prefer a few years back in medicine and a subsequent shot at the presidency after that). 

Óttar Proppé has behaved more like a leader than Benedikt Jóhannesson, and strengthened his reputation as a good negotiator and "stabilisator". Given his showbiz background it has been important for him to be seen as a serious politician. He is basically very likable and has turned out to be a skillful politician.

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With an 88.5% majority the Pirate Party membership have accepted confining the principle that MPs can not simultaneously be ministers to their own members. 

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Turns out IPs "compromise" proposal on fishing was that 3-4% of the total quotas should be auctioned off on a test basis, and this share should solely be taken from increases in the quotas, so no quotas would have to be withdrawn. The quota fees should only be marginally increased. These symbolic changes are fully inadequate, and the negotiations have gone nowhere. 

Viðreisn and BF also still refuse to incorporate PP in a centre-right coalition unless Sigmundur Davíð Gunnlaugsson resigns from the Althing (which he refuses). 

Bjarni Benediktsson then approached Katrín Jakobsdóttir and once again enquired about IP, PP + LG - but got yet another no. 

So it seems IP is trying to wear the others down, hoping they become more willing to compromise. They seem convinced that there can not be established a government without them. 

LG opened up for IP, LG, SDA, but due to the events back in 2008-09, when SDA managed to shift the entire blame for the financial crisis onto IP after their 2007-09 coalition (forcing Davíð Oddsson to resign as governor of the National Bank and getting PM Geir H. Haarde before the Constitutional Court) this is very touchy in IP. The bitterness against SDA is still very much alive.

When it comes to "grand coalitions" LG would prefer IP, LG, BF and SDA, but this requires a break up of the BF/Viðreisn alliance. Their back-up is IP, LG, SDA. 

As the Pirates will not work with IP and PP they are de facto out. They stil fantasize about reopening the five party negotiations among the opposition, but it looks like that ship has sailed. And PP are de facto isolated as too many parties either refuse to work with them, or refuse to work with both them and IP. 

So any majority will have to be based on the five other parties, and this will likely require IP to offer a lot more than they are currently willing to.

Guðni Th. Jóhannesson keeps sharpening his rhetoric about the responsibility of the parties to secure a functioning government. He seems determined to secure a majority government. Perhaps his background as a political historian makes it more difficult to start out appointing a minority government in violation of Icelandic political tradition. 

Coming from a country where minority governments are the norm its a bit funny to see the lengths Icelanders are willing to go to in order to secure a majority coalition - however unnatural that coalition will end up being. On paper a centre-left minority government, which could secure support for different policies from each of the three other parties, would seem a lot more flexible and realistic than a grand coalition between parties with little in common. But that is not the Icelandic way, still they may end up with one anyway. 

[Deleted]

It really seems IP is simply trying to wear the others down. Today Bjarni Bene­dikts­son­ once again invited Viðreisn to join the current government, and got the predictable no from Bene­dikt Jó­hann­es­son. I doubt that tactic will work.