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### Viewing cable 09REYKJAVIK81, ICELAND: SOCIAL DEMS IN DRIVER'S SEAT AFTER ELECTION

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09REYKJAVIK81 | 2009-04-27 11:11 | 2011-01-13 05:05 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Reykjavik

`

    VZCZCXRO9690
    OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
    RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
    DE RUEHRK #0081/01 1171117
    ZNR UUUUU ZZH
    O 271117Z APR 09
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 4059
    INFO RHEHNSC/NSC WASHINGTON DC IMMEDIATE
    RUEHZL/EUROPEAN POLITICAL COLLECTIVE
    RUEAIIA/CIA WASHDC

` `

    UNCLAS SECTION 01 OF 02 REYKJAVIK 000081

    SIPDIS

    SENSITIVE

    STATE FOR EUR DAS GARBER, EUR/NB
    NSC FOR HOVENIER

    E.O. 12958: N/A
    TAGS: PGOV PREL IC
    SUBJECT:  ICELAND: SOCIAL DEMS IN DRIVER'S SEAT AFTER ELECTION
    VICTORY

    ¶1.  (SBU) Summary:  Icelandic Prime Minister Johanna
    Sigurdardottir's Social Democratic Alliance (SDA) came away with a
    clear victory in parliamentary elections on April 25, winning nearly
    30 percent of the vote.  The SDA now holds a commanding position in
    coalition talks, as their Left-Green (LG) partners in the current
    minority government suffered a last-minute fade and slipped to third
    behind the conservative Independence Party.  A surprisingly strong
    performance by two other pro-EU parties means the SDA could abandon
    the LG in favor of an "EU Government," and Sigurdardottir is plainly
    using this fact as leverage in negotiations with the Euro-skeptic
    Left-Greens.  Although the SDA and LG will probably stay together to
    create Iceland's first leftist majority government, the LG will
    likely be forced to move towards Brussels.  Though the LG may demand
    some concessions in exchange, these are likely to be on domestic
    welfare and economic issues rather than foreign affairs, which are
    problematic given the LG's anti-NATO platform.  Aware that time is
    on their side, the SDA will probably drag out the announcement of a
    new government to ratchet up the pressure on their would-be
    partners.  End Summary.

    ¶2.  (U) As anticipated, Iceland's Social Democratic Alliance (SDA)
    came away from national parliamentary elections on April 25 with the
    largest share of the vote.  In its best performance since its
    founding a decade ago, Prime Minister Johanna Sigurdardottir's party
    won just shy of 30 percent of the vote and will hold 20 seats in the
    63-member Althingi.  Sigurdardottir proclaimed the results a clear
    signal that the public trusts the SDA to pull Iceland out of its
    economic difficulties, while also claiming that the SDA's desire to
    apply for EU membership played a key role.  The SDA focused its
    message almost entirely on the EU question in the final three days
    of the campaign, arguing that the simple act of applying for
    membership would bring needed credibility to Iceland's economic
    recovery efforts.

    ¶3.  (U) Saturday's results were an unwelcome surprise for Finance,
    Agriculture and Fisheries Minister Steingrimur Sigfusson's
    Left-Green Movement (LG), which lost nearly six percent from the
    final pre-election opinion polls.  Although the LG's 22 percent
    share of the vote increases their Althingi delegation from nine
    seats to 14, the party had clearly hoped for more and struggled to
    spin the results as a victory rather than a disappointment.
    Commentators were quick to remind that the LG has historically
    suffered from last-minute electoral collapses, and pointed to
    several ill-advised statements by Left-Green ministers in the waning
    days of the campaign.  Party Chair Sigfusson reportedly said at an
    event on April 23 that leading airline Icelandair might have to be
    nationalized, then quickly backtracked via a Ministry of Finance
    press release, while Minister of Environment Kolbrun Halldorsdottir
    criticized oil exploration efforts in the Dreka Region off Iceland's
    northeast coast and said the country should explore wind power
    instead.  Taken together, the statements may have raised doubts in
    voters' minds about the LG's long-term abilities to rebuild
    Iceland's economy.  The party's downturn was particularly hard on
    MinEnv Halldorsdottir, who was not reelected to parliament.

    ¶4.  (U) Combined with the Left-Green collapse, three other parties
    defied expectations.  The conservative Independence Party, though
    clearly suffering voters' wrath over the economic collapse and
    government breakdown in January, did slightly better than
    anticipated and only fell to second place behind the SDA.  The
    Progressive Party (PP), which struggled for much of the spring to
    find a compelling campaign narrative, nonetheless managed to gain
    three percentage points over the final pre-election polls and adding
    two MPs.  Combined with the surprising run of the new Citizens'
    Movement, which took four Althingi seats in its maiden campaign
    effort, the Progressives' success may actually reflect a growing
    preference for EU membership more than anything else.  Both the PP
    and Citizens' Movement have endorsed EU accession as a solution to
    Iceland's economic woes, and as such may have benefitted from the
    SDA's focus on the issue and the LG's push-back from Brussels.

    ¶5.  (U) Final election results were as follows, with comparison to
    the 2007 elections:

    SDA = Social Democratic Alliance
    IP = Independence Party
    LG = Left-Green Movement
    PP = Progressive Party
    CM = Citizens' Movement
    LP = Liberal Party
    MD = Movement for Democracy

    Party Percent  MPs Change
           (MPs)

    REYKJAVIK 00000081  002 OF 002

    SDA  29.8  20 +2
    IP  23.7  16 -9
    LG  21.7  14 +5
    PP  14.8  9 +2
    CM   7.2  4 --
    LP   2.2  0 -4
    MD   0.6  0 --

    Note:  The Althingi (parliament) has 63 members.

    ¶6.  (SBU) Party chairs began staking out their negotiating positions
    immediately, with SDA Chair Sigurdardottir announcing simultaneously
    that she would be happy to see the SDA-LG government continue, but
    also that a majority had voted for pro-EU parties and that the new
    government needed to reflect this.  The LG instead chose to spin the
    results as a nationwide move to the left and an endorsement of the
    current government's economic policies, with LG Chair Sigfusson
    going so far as to say on a Sunday night roundtable that only
    Iceland's "elite" wants EU membership.  Progressive Chair Sigmundur
    David Gunnlaugsson, meanwhile, tried to avoid sounding desperate as
    he enthusiastically backed Sigurdardottir's suggestion that an
    SDA-PP-CM majority could coalesce around the objective of an EU
    membership bid.

    ¶7.  (SBU) Coalition talks began on the afternoon of April 26, with
    PM Sigurdardottir and LG Chair Sigfusson meeting at Sigurdardottir's
    residence for informal discussions.  Sigurdardottir said after the
    talks that they had covered the policies of the parties in general,
    including their positions on EU membership.  At the televised
    post-elections roundtable later that night, both Sigurdardottir and
    Sigfusson admitted that the EU membership question was the most
    difficult issue that the SDA and the LG had to solve in their
    coalition negotiations.  The SDA and LG parliamentary groups will
    meet today where the party leaders will seek a mandate from their
    respective parties to continue the coalition talks.  From a
    technical perspective, PM Sigurdardottir still holds the mandate to
    lead the government.  As such, the SDA and the LG do not have to
    meet with the President of Iceland to renew their mandate, but
    Sigurdardottir will do so out of courtesy on the afternoon of April
    ¶27.

    ¶8.  (SBU) Comment:  Looking ahead, the SDA will use the electoral
    results as leverage to force the LG to come around on the EU
    question.  SDA parliamentarians have underscored the importance of
    applying for EU membership and are not keen on budging from that
    stance.  Additionally, there is now a parliamentary majority for EU
    membership given that the SDA, the PP, the Citizens' Movement, and
    even a portion of IP MPs are willing to start accession negotiations
    with the EU.  This puts the LG in a very difficult negotiating
    position.

    ¶9.  (SBU) Comment, cont'd:  Given the Left-Greens' evident desire to
    be part of Iceland's first leftist majority government, they will be
    under great pressure to yield to SDA demands on the EU question.  In
    exchange, they may demand some face-saving concessions, most likely
    on economic, welfare, or environmental issues.  This could mean a
    more difficult landscape for would-be investors in heavy industry,
    e.g. aluminum.  However, there are few indications that the
    Left-Greens will press on core foreign policy issues, such as their
    desire for Iceland's withdrawal from NATO.  LG insiders have noted
    to post that the party's foreign policy is lacking in depth, and
    that a push on foreign policy priorities would likely reveal splits
    between pacifist and neutralist elements within the LG.  In any
    event, time is on the SDA's side, and we anticipate that
    Sigurdardottir may draw out coalition talks as a way of increasing
    public pressure on the LG to give on the EU membership issue.

    VAN VOORST

`