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### Viewing cable 07REYKJAVIK114, Iceland: 2007 Parliamentary Elections, One Month Out

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07REYKJAVIK114 | 2007-04-18 13:01 | 2011-01-13 05:05 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Reykjavik

`

    VZCZCXRO9216
    PP RUEHC
    DE RUEHRK #0114/01 1081352
    ZNR UUUUU ZZH
    P 181352Z APR 07 ZDK EATC SVC #0827
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 3254
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

` `

    UNCLAS SECTION 01 OF 04 REYKJAVIK 000114

    SIPDIS

    SIPDIS

    SENSITIVE

    E.O. 12958: N/A
    TAGS: PGOV PREL SENV EIND IC
    SUBJECT: Iceland: 2007 Parliamentary Elections, One Month Out

    Refs: A) 06 Reykjavik 416
     B) 06 Reykjavik 359
     C) 06 Reykjavik 312
     D) 04 Reykjavik 354

    REYKJAVIK 00000114  001.3 OF 004

    ¶1. (U) Summary:  A month before Icelanders head to the polls for the
    May 12 parliamentary elections, the Left Greens are riding a wave of
    interest in environmental concerns.  However, the emergence of a new
    green party could splinter the environmentalist bloc and ensure the
    current center-right coalition's survival.  Apart from rhetoric
    about retroactively withdrawing Iceland's support for the invasion
    of Iraq in 2003 (but no other changes to Iceland's Middle East
    policy), foreign policy has not been a campaign issue.
    Environmentalist issues and energy-intensive industrial construction
    feature prominently in all parties' campaigns, but many here are
    comfortable with their quality of life and credit the Independence
    Party-led government.  In the end it might all come down to
    Carville's phrase: "It's the economy, stupid."  End Summary.

    Election Procedures
    -------------------
    ¶2. (SBU) Election procedures in Iceland are similar to those in most
    Western European countries.  The Althingi (parliament) has a total
    of 63 seats which are allocated proportionally across six voting
    districts.  Voters cast their ballots for parties, not for
    individual candidates, though the parties publish their candidate
    lists in rank order ahead of the election.  To receive an Althingi
    seat, a party needs to receive at least five percent of the vote
    nationwide, in addition to competing successfully within a given
    district.  The traditionally apolitical president, who is elected
    separately in national elections in the year following Althingi
    elections, is empowered to formally appoint the cabinet.  In
    practice, the leaders of the political parties forming the
    successful coalition decide the makeup and allocation of cabinet
    seats among themselves.  Minority governments are not
    constitutionally permitted.  Traditionally, only when the party
    leaders are unable to reach a conclusion by themselves in reasonable
    time does the president exercise his power to appoint the cabinet
    himself.  Rumors continue to circulate, however, that the current
    president will break with tradition to the benefit of his political
    friends on the left (see below).  Since 1991, two-party coalitions
    have held power with the Independence Party as the senior partner,
    but three-party coalitions were not uncommon in the past.  Of the
    seven parties running, we expect five or six will be represented in
    the next parliament.

    The Parties: Independence Leads The Way
    ---------------------------------------
    ¶3. (U) The Independence Party (IP), the senior party in the current
    majority coalition, is a center-right party led by Prime Minister
    Geir H. Haarde.  In the past year party support has been measuring
    at 36 to 43 percent in Gallup polls, a slight rise over the 33.7
    percent (22 seats) they received in the 2003 Althingi elections.
    The IP has a tendency to measure higher in polls than in elections,
    but it can still safely expect to get between 30 and 40 percent of
    the vote.  The IP's campaign touts the government's economic record,
    low unemployment, tax reductions, and diminishing government debt.
    At the same time, the IP has responded to the local environmental
    debate (Ref A) -- and some argue, stolen a plank from their primary
    opposition, the Social Democratic Alliance -- by announcing plans to
    slow down the build-up of heavy industry in Iceland, such as
    aluminum smelters, and establish a framework plan for possible
    future projects involving heavy industry.

    ¶4.  (U) On foreign policy, the IP is a staunch supporter of the
    bilateral defense relationship with the United States and Iceland's
    NATO membership.  Although IP stalwarts were frustrated with the
    manner in which the USG announced the withdrawal of U.S. military
    forces from Iceland in March 2006, PM Haarde's pragmatism and
    trustworthiness has made him the frontrunner in forging a new
    bilateral defense relationship with the United States.  In addition,
    the IP has emphasized the need for Iceland to take on more
    responsibilities in security and defense affairs, fully realizing
    the need to fill the void left by the departure of U.S. forces.  The
    party's success in this regard can be seen in the corresponding
    failure of opposition challengers to put foreign policy on the
    campaign agenda this spring.

    Progressives: Running On Their Record (Sort Of)
    --------------------------------------------- --
    ¶5. (U) The junior member in the coalition, the Progressive Party
    (PP), is a traditionally agrarian and centrist party led by Minister
    of Industry and Commerce Jon Sigurdsson.  Despite getting 17.7
    percent (12 seats) in the last election, polls show the party with
    only eight to 10 percent support during the past year (which would
    translate into a drop to five Althingi seats).  The party has in
    recent years attempted to extend its political base to urban areas,
    with unsatisfactory results -- Iceland's new urbanites have instead
    blamed the PP for industrializing Iceland's previously unspoiled
    highlands, while their coalition partners the IP get all the credit
    for recent economic growth.  The Progressives' political base

    REYKJAVIK 00000114  002 OF 004

    remains in rural Iceland, mainly farming areas such as Southern and
    Northeastern Iceland.  The party supports continuing economic growth
    through further build-up of heavy industry and is opposed to the
    other parties' policies of putting a halt to or pausing further
    development.  Their slogan, "Continued Results -- Don't Stop!"
    reflects the party's attempt to gain credit for Icelanders'
    comfortable lifestyle and support for further industrial investment.

    ¶6.  (U) On international affairs, the PP was more cautious in its
    reactions to the closure of NASKEF and, apart from then-PM Halldor
    Asgrimsson's initial fit of pique, stayed largely aloof from the
    bilateral negotiations on the future arrangement of the bilateral
    defense relationship.  Foreign Minister Sverrisdottir of the
    Progressives has, however, let slip a few public comments of
    frustration regarding the withdrawal of U.S. forces.  The PP has
    flirted with the idea of looking to Europe and not just the U.S.,
    with the FM making several comments over the past year about the
    "inevitability" of studying questions related to EU membership.  The
    party is generally pro-American and pro-NATO, however, and has
    welcomed energy-intensive industrial investment by large American
    corporations, such as Alcoa, in Iceland.

    The Alliance: Still Trying To Find Its Way
    ------------------------------------------
    ¶7. (U) The Social Democratic Alliance (SDA), a center-left party,
    was officially established in 2000 from the merger of four leftist
    and center-left parties.  After a good showing in the 2003 elections
    (20 seats) followed by a change of party leadership in 2005 (current
    leader Ingibjorg Solrun Gisladottir is Iceland's only female party
    chair), the SDA has been losing momentum and its support has dropped
    steadily -- polls in March put the SDA at around 20 percent, behind
    the Left-Greens (see below) for the first time in its history.  The
    SDA has touted the need to renovate the Icelandic welfare system
    along the lines of the Nordic social democratic welfare model in
    order to counter growing income disparity over the last decade.  The
    SDA maintains that the current government has mismanaged the
    economy, to the detriment of the the elderly and the disabled in
    particular.  On "green" matters, the party has often wobbled in its
    attitudes towards further buildup of heavy industry.  The SDA's
    present campaign platform, however, calls for an interim freeze on
    all plans for further industrial buildup, pending drafting of a
    framework to exclude certain locations from industrial development.
    When it comes to foreign relations, the SDA has pronounced itself
    "skeptical" of the value of current defense ties with the U.S. and
    alleges that the GOI could have achieved more in negotiations in
    2006 had it been better prepared for the withdrawal of U.S. forces
    (Ref B).  The SDA is the only party to openly call for E.U.
    membership for Iceland and has similarly said that Iceland should
    look to Europe more on security matters.  Party chair Gisladottir
    has also pledged that the first act of any SDA-led government will
    be to retroactively remove Iceland from the list of countries that
    supported the 2003 invasion of Iraq, though without stating any
    alternative policy goals regarding the Middle East.

    The Left-Greens: Flavor Of The Month?
    -------------------------------------
    ¶8. (SBU) The Left-Green Movement (LG) is composed of the leftists
    who did not want to join the SDA when it formed, due to concerns
    over both ideology and leadership.  The party did not do well in the
    2003 elections with only 8.8 percent of the vote (five seats), but
    since then has capitalized on the environmental issues wave that has
    swept Iceland in the last couple of years.  In the past year the LG
    has been polling around 20 percent, with support surging as high as
    27 percent in the past few months.  The LG is no longer a fringe
    party and will likely be a major player in the post-election
    coalition negotiations, though party leaders privately voice concern
    that the new "Iceland Movement" (see below) will draw from the same
    pool of disaffected voters.  The Left Greens have been commended for
    having a clear position on issues, and have thus pulled left-leaning
    voters from the comparatively wishy-washy SDA.  Despite an avowedly
    socialist view on economic and fiscal policy, the LG claims it will
    not raise taxes, but will instead redistribute the tax burden in
    order to decrease income disparity.  On its pet issue, the
    environment, the LG wants all plans for further buildup of heavy
    industry to be halted in favor of the creation of diverse sources of
    employment in rural areas.  From its founding, the LG platform has
    called for Iceland's withdrawal from NATO and the development of a
    pacifist, cooperation-oriented foreign policy.  That said, the LG
    Chair admitted to the Ambassador that he sees the need for the party
    to be "realistic" and that withdrawal from NATO will not be in the
    cards any time soon.  There is no question, however, that if in
    government the Greens will demand that Iceland's name be immediately
    removed from the Coalition of the Willing regarding Iraq.

    Liberals: Xenophobia Isn't Selling, Yet
    ---------------------------------------
    ¶9. (U) The Liberal Party (LP) was originally a one-issue party
    fighting the current quota system of fisheries management in
    Iceland.  The party drew 7.4 percent (four seats) in the last
    elections, but its support had dropped to about three to four

    REYKJAVIK 00000114  003.5 OF 004

    percent by last November.  At that point, the LP caught the public's
    attention when it raised the issue of the growing numbers of
    immigrant workers coming to Iceland after labor movement within the
    European Economic Area was fully liberalized in May 2006.  The party
    warned of possible consequences for the Icelandic wage market, the
    future of the welfare system, and Icelandic society as a whole if
    foreigners did not properly "adjust" to their new home.  After an
    initial spike in LP following in the polls, the public at large and
    other political parties have since lambasted the LP for being
    xenophobic and even racist in its attitudes towards foreigners.
    (Comment:  Likely due to the fact that unemployment is so low --
    around two percent -- that the arrival of immigrants is helping,
    rather than burdening, the Icelandic economy.  End comment.)  They
    deny these allegations but their campaign advertisements suggest
    that there may be some truth to these accusations.  While the party
    still emphasizes fisheries management, the immigrant issue appears
    to be taking over as issue number one. The LP is fairly pro-American
    and supports Iceland's NATO membership and maintaining the bilateral
    defense relationship with the U.S.

    The Iceland Movement: Splitting the Green Vote
    --------------------------------------------- -
    ¶10. (SBU) The newest political party on the scene, The Iceland
    Movement - Living Land (IM), fashions itself as a "right-green"
    party headed by a well-known television personality, who is the
    party's interim chairman.  The first polls since the party's
    formation in February, 2007 indicate that the party would get
    approximately five percent in the elections.  Like the Left Greens,
    the IM wants to stop further buildup of energy-intensive industries
    that would affect unspoiled natural areas.  Observers point out that
    this candidacy will divide environmentalist voters instead of
    uniting them, and thus likely benefit the current coalition
    partners.  A Progressive Party stalwart gleefully told the
    Ambassador that he welcomes The Iceland Movement's candidacy for
    exactly this reason, and joked that maybe a few more environmental
    groups ought to run for parliament.  So far the IM's position
    towards the U.S. -- and virtually every other issue -- is a tabula
    rasa.

    Coalition Options
    -----------------
    ¶11. (U) Until very recently, the predominant assumption among both
    political pundits and the general public was that the current
    coalition government would be history after May 12 (owing largely to
    the Progressives' collapse in 2006 -- Ref C).  A mid-March Gallup
    poll showed that 28 percent of voters wanted a center-left coalition
    (SDA and LG), while 24 percent wanted to see the current coalition
    live on.  One coalition option that has often come up is a marriage
    of the extremes on right and left (the IP and the LG), which polled
    at 22 percent in March.  Two options that are commonly believed to
    be off the table are a right and center-left (IP and SDA) mix, and a
    coalition of all three current opposition parties in parliament --
    both of these choices are polling at less than 10 percent.  However,
    the emergence of The Iceland Movement has thrown previous forecasts
    into disarray, and Gallup poll data released on April 16 have the
    current IP-PP coalition defying earlier odds at 36 percent support,
    the most popular option.  An old saw of Icelandic politics is that
    the Progressives always do better than the pre-election polls
    indicate.  In this case, thanks to the IM, the Progressives may do
    better than even the election results themselves indicate, as the
    "right-greens" may do just well enough to sink the left's chances
    without getting any Althingi seats themselves.  In this scenario,
    the IP and PP would get a higher number of Althingi seats than their
    raw share of votes cast.

    ¶12.  (SBU) One final wild card, however, is the possible role of
    President Olafur Ragnar Grimsson.  Grimsson, a former MP and
    minister for one of the SDA's predecessor parties, has had a number
    of public spats with the current government during his tenure, most
    notably surrounding his unprecedented use of presidential veto power
    against a media ownership bill in 2004 (Ref D).  Advisors in the
    current government have passed to the Ambassador rumblings that
    Grimsson, convinced that the IP-PP government is doing irreparable
    damage to the country, may take another unprecedented step in May
    and give the mandate to form a government to one of the parties on
    the left.  Though constitutionally allowed, such a move might seem
    to many as a gross overstepping of the bounds of the President's
    generally ceremonial role.  It is not clear how the potential
    constitutional crisis in this case might be resolved.

    ¶13. (SBU) Comment:  As the issues have been framed so far, in a
    month's time Iceland's voters will face a referendum on whether
    heavy industrial investment is the price to be paid for Iceland's
    high standard of living or if some of the economy's vibrancy should
    be traded for preserving untouched areas of the country.  Absent any
    involvement by President Grimsson, PM Haarde's Independence Party
    will likely be the driving force when coalition negotiations begin
    after the elections.  Unless The Iceland Movement splinters the
    enviro-vote enough to let the current coalition continue, the next
    GOI will need to take account of environmental concerns and may be
    forced to slow down the pace of investment in aluminum and other

    REYKJAVIK 00000114  004.3 OF 004

    heavy industries -- a move that would likely have a direct impact on
    the two U.S. aluminum firms active here.  On other issues of
    importance to the USG, however, any IP-led government can be
    expected to continue most current GOI policies.

    CAMPBELL

`