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### Viewing cable 08REYKJAVIK11, ICELAND: REYKJAVIK CITY COUNCIL PLAYS TWO ROUNDS OF

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08REYKJAVIK11 | 2008-01-29 16:44 | 2011-01-13 05:37 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Reykjavik

`

    VZCZCXRO4214
    PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
    RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
    DE RUEHRK #0011/01 0291644
    ZNR UUUUU ZZH
    P 291644Z JAN 08
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 3546
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

` `

    UNCLAS SECTION 01 OF 02 REYKJAVIK 000011

    SIPDIS

    SIPDIS

    SENSITIVE

    E.O. 12958: N/A
    TAGS: PGOV IC
    SUBJECT:  ICELAND: REYKJAVIK CITY COUNCIL PLAYS TWO ROUNDS OF
    MUSICAL CHAIRS

    Ref:  07 Reykjavik 114

    ¶1.  (U) Summary:  The majority coalition in the Reykjavik City
    Council has broken down twice in the past three months, resulting in
    three different mayors for the largest city in Iceland. The
    coalition majority of the Independence Party (IP) and the
    Progressive Party (PP) split up in October over a controversial
    public-private merger of two energy investment companies. The PP's
    lone councilman formed a shaky coalition with the minority parties.
    This coalition terminated in January when the one of the minority
    parties had a change of heart and left the coalition to join forces
    with the IP. Reykjavik voters are outraged at the turmoil and the
    rapid changes have hurt the credibility of the city council.  The
    newest mayor is pulling out all the stops to restore confidence.
    While some predict that the unrest at City Hall will cause strains
    in the national IP-Social Democrat governing coalition, no such
    faults are evident so far.  The tumult has, however, made it less
    clear whether the Reykjavik mayorship will retain its traditional
    role as a stepping stone to national office.  End Summary.

    First Ever Majority Coalition Split
    -----------------------------------
    ¶2.  (U) On October 11, 2007 the majority coalition of the
    Independence Party and the Progressive Party in the Reykjavik City
    Council suddenly collapsed. The coalition had a one seat majority
    and Bjorn Ingi Hrafnsson, the sole PP city councilor, split off to
    form a new majority with the opposition parties that have seats in
    the city council: the Social Democratic Alliance (SDA), the Left
    Green Movement (LG), and the Liberal Party-Independents (LP). This
    was the first time in the history of Reykjavik that the coalition
    majority split mid-term. The cause was reportedly a disagreement
    between the IP and the PP over a public-private energy investment
    merger gone awry.  In early October 2007, Reykjavik Energy Invest,
    the business development and investment arm of Reykjavik Energy
    (Note:  Reykjavik Energy is a publicly-owned geothermal energy
    company, whose largest shareholder is the City of Reykjavik. End
    Note.), and Geysir Green Energy, a private investment firm targeting
    the geothermal energy sector, announced their agreement to merge.
    The IP was quickly mired in an internal party feud over the merger
    and the role of Mayor Vilhjalmur Vilhjalmsson, and as the negative
    media attention increased, Progressive rep Hrafnsson broke ranks
    with the coalition in a clear attempt to leave a sinking ship.

    ¶3.  (U) The new majority consisted of the SDA, the LG, the PP, and
    the LP, and Dagur Eggertsson (SDA) became mayor. Olafur Magnusson,
    the sole LP city councilor, was considered the architect of the new
    majority. He was on sick leave while being treated for depression
    during most of 2007, and his alternate, Margret Sverrisdottir,
    filled his seat in the meantime. Both Magnusson and Sverrisdottir
    had left the Liberal Party in early 2007 due to disagreements with
    the party leadership and joined a brand new political party called
    the Iceland Movement (reftel); both remained on the city council
    under the Liberal Party-Independent label. Public opinion was
    divided on Progressive rep Hrafnsson's role in breaking up the IP-PP
    majority coalition, but the IP city councilors, including former
    Mayor Vilhjalmsson, were seen as bigger losers in the public-private
    merger drama.

    Majority Coalition Terminated...Again
    -------------------------------------
    ¶4.  (U) In a surprise move on January 21, City Councilor Magnusson
    (LP) and former Mayor Vilhjalmsson (IP) announced they had reached
    an agreement on forming a new majority coalition. Magnusson will be
    mayor for the first half of the remaining electoral term and
    Vilhjalmsson for the second half (Note: The current electoral term
    ends in May 2010. End Note.). The decision caught everyone off
    guard, including Magnusson's alternate, Sverrisdottir, who stated
    that she would not support the new majority because Magnusson kept
    her out of the loop.  Pundits have been quick to note that her
    ambivalence hobbles the coalition, because if Mayor Magnusson is
    ever absent from city council meetings, Sverrisdottir can vote with
    the minority.

    ¶5.  (U) The outgoing coalition wasted no time in voicing their
    complaints about the reshuffle, accusing the IP and Magnusson of
    undermining city government and voters' trust in their elected
    officials purely for selfish reasons.  Outraged supporters of the
    outgoing majority disrupted the City Council meeting on January 24,
    forcing a delay of several hours in Magnusson's election as mayor.

    ¶6.  (SBU) Meanwhile, on January 23, Hrafnsson (PP), who had split
    the coalition in October, announced his immediate resignation from
    the Reykjavik City Council. In the days preceding the decision a
    former PP member of parliament accused Hrafnsson of trying to rise
    in the ranks of the party at the expense of others, and for
    purportedly using party funds to buy expensive clothes for use in
    the election campaign for the 2006 local elections. (Comment:  Once
    Hrafnsson was no longer keeping his party in the majority in city
    government, it seems the party leadership made it clear that the
    clothing allegations were the proverbial straw that broke the

    REYKJAVIK 00000011  002 OF 002

    camel's back.  His exit has for now quashed hopes of his potential
    as a future leader of the PP.)

    Snapshot of the New Mayor: Olafur F. Magnusson
    --------------------------------------------- -
    ¶7. (U) Olafur F. Magnusson is a veteran at Reykjavik city politics.
    Before he was elected to the City Council in the 2002 local
    elections for the LP, he served as an alternate City Councilor for
    the IP from 1990-1998 and as City Councilor for the same party from
    1998-2001. Magnusson worked as a medical doctor in the 1970s and
    1980s and was active in the grassroots politics of the IP. Magnusson
    parted ways with the IP in 2001 because his environmental policy
    views were at odds with the policy of the IP. Subsequently he joined
    the Liberals and was elected to the Reykjavik City Council for the
    party in 2002 and 2006. Magnusson now considers himself an
    independent in the city council, but he is a registered member of
    the Iceland Movement.

    Comment
    -------
    ¶8.  (SBU) Comment:  Despite media speculation, the changes at City
    Hall do not seem to have raised tension between the national
    government's IP-SDA coalition.  Prime Minister Haarde (IP) and
    Foreign Minister (and former Reykjavik Mayor) Gisladottir (SDA) have
    been careful in their public comments, though Gisladottir did allow
    that the way the new majority came about was "an unfortunate step"
    for both the people of Reykjavik and Icelandic politics in general.
    More broadly, these two swift changes in coalition majorities may
    herald a new era in Icelandic politics. This era may see
    power-hungry politicians who are not afraid of splitting alliances
    in exchange for greater professional glory. Additionally, neither
    Magnusson nor his coalition partner Vilhjalmson of the IP claim
    ambitions to national political office, which when added with a loss
    of voter confidence could mean that fewer look at the Reykjavik
    mayorship as a traditional stepping stone to higher office.

    ¶9.  (SBU) Comment, cont'd:  Olafur Magnusson (LP) and the IP city
    councilors can for the moment be called the winners of the course of
    events on January 21. However, the creation of the new majority
    comes at the cost of voter confidence. A January 24 poll shows the
    new majority enjoys the support of only one quarter of the
    electorate, and just six percent support the new mayor. Many have
    asked if Magnusson is capable of handling the mayoral position given
    his medical problems in 2007, a line of questioning not usually seen
    in Icelandic politics.  Magnusson has gone on the offensive to
    answer the questions, hitting all major media outlets over his first
    weekend as mayor and asking to be judged "by my work, not by my
    illness."  However, with such a tenuous majority, the life of the
    new coalition could easily be cut short. End Comment.

    VAN VOORST

`