By Jon Henley: Iceland’s embattled prime minister, Sigmundur Davíð Gunnlaugsson, has tendered his resignation in the wake of a mounting political crisis over his family’s offshore investments, local media have reported.
The agriculture and fisheries minister, Sigurður Ingi Jóhannsson, told state broadcaster RUV that Gunnlaugsson was resigning as prime minister and that he would be replacing him.
Gunnlaugsson, the first major casualty from the Panama Papers leak of more than 11 million documents that lay bare the tax-avoidance arrangements of the rich and famous around the world, will nonetheless remain leader of his Progressive party, Jóhannsson said.
Local media said the move needed the agreement of both the rightwing Independence party – Gunnlaugsson’s coalition partner – and Iceland’s president, Ólafur Ragnar Grímsson, before it was official.
The Independence party leader, finance minister Bjarni Benediktsson, was reportedly in talks with Grímsson, who flew back early from the US on Tuesday morning to sound out party representatives as the island’s political crisis deepened.
Another mass protest was planned in Reykjavik later on Tuesday as public anger at the prime minister continued to escalate following revelations that Gunnlaugsson’s wife owned a secret offshore investment company with multimillion claims in Iceland’s failed banks.
Gunnlaugsson had earlier threatened to call fresh elections if his junior coalition partner did not support his bid to stay in office. Benediktsson, whose name also appeared in the leaked documents in connection with a Seychelles-based company of which he once owned a third, returned from holiday in Florida on Tuesday.
He had pointedly declined to back Gunnlaugsson on Monday, saying the leaks were a “heavy blow” to the government.
Failed to declare interest
The leaked documents from the Mossack Fonseca law firm show Gunnlaugsson and his wife, Anna Sigurlaug Pálsdóttir, bought a British Virgin Islands-based offshore company, Wintris Inc, in December 2007 to invest her share of the proceeds of the sale of her father’s business, Iceland’s only Toyota importer.Gunnlaugsson sold his 50% stake to his wife for a symbolic $1 at the end of 2009, eight months after he was elected to parliament as an MP for the centre-right Progressive party. He failed, however, to declare an interest in the company either then or when he became prime minister in 2013.
Gunnlaugsson’s office has said his shareholding was an error due simply to the couple having a joint bank account and that it had “always been clear to both of them that the prime minister’s wife owned the assets”. The transfer of ownership was made as soon as this was pointed out, a spokesman said. The prime minister denies he was required to declare an interest.
The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.
But Gunnlaugsson’s political opponents and many ordinary Icelanders, more than 10,000 of whom staged a first mass protest outside parliament on Monday night, are outraged at what many see as an attempt by their prime minister – even if he has done nothing illegal – to hide money offshore.
Such allegations are particularly incendiary in Iceland, which was brought almost to its knees in the financial crisis of 2008 by the recklessness of a small group of bankers and businessmen – several of whom are now in jail – who used offshore companies to conceal their dealings in high-risk financial products.
Plunged into a deep depression, Iceland had to be bailed out by the International Monetary Fund – and introduced strict capital controls limiting the amount of money people could take out of the country.
Gunnlaugsson is also accused of a conflict of interest for failing to disclose his involvement with the company.
Wintris held millions of pounds worth of bonds in Landsbanki, Glitnir and Kaupthing, the three big Icelandic banks that collapsed in the crisis with liabilities of more than 10 times the country’s GDP – and whose bankruptcies the prime minister’s government was responsible for overseeing.
Gunnlaugsson has repeatedly said he broke no laws and held no money offshore personally, and that he and his wife had always paid all their taxes in Iceland. His policies, which included refusing to repay the failed Icelandic banks’ many foreign creditors in full, always aimed to put the Icelandic people first, he has insisted.
On Tuesday, however, members of Gunnlaugsson’s party called for the first time for him to go. City councillors from his own constituency of Akureyri said he should step down over what they deemed a crisis of confidence.
‘People feel humiliated’
Opposition MPs are much more outspoken. “People just feel humilated,” said Bigitta Jónsdóttir of the radical Pirate party, which opinion polls currently estimate is the country’s largest with the support of between 35% and 42% of the electorate.“After what happened to this country in 2008 we needed honesty, transparency and integrity from our leaders,” Jónsdóttir said. “None of these things have been evident
Arni Pall Arnason, leader of the opposition Social Democratic Alliance, said Gunlaugsson’s position was no longer tenable.
“I think it’s obvious that we cannot tolerate a leadership that is linked to offshore holdings,” Arnason said. “Iceland cannot be the only western European democratic country with a political leadership in this position.”
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