After bank crisis, Panama and paedophilia scandals, Iceland votes
(AFP photo: Attendees take part in the final televised debate on the eve of snap parliamentary election on October 27, 2017 in Reykjavik)
(Bloomberg) Icelanders go to the polls to pick a new parliament for the third time in four years, in an election that has seen the ruling centre-right defend its economic record and the opposition call for greater public spending after years of fiscal restraint.
Polls published in the run-up to Saturday’s vote saw the Independence Party of Prime Minister Bjarni Benediktsson neck-and-neck with the opposition Left Green Movement. Whichever party emerges on top is not guaranteed a place in government, since both will likely need to form broad coalitions in order to obtain a majority of seats in parliament.
Around 245,000 people are eligible to vote in the small country in the North Atlantic, with polls open between 10am and 10pm local time.
The election comes at a crucial juncture for the Icelandic economy, which is showing signs of a slowdown after its long and now booming recovery from the financial crisis. Much of the debate has centred on the need to rebuild the country’s infrastructure and on how to avoid another round of financial instability.
"Soft landings have not been our strong side in the past, so I will allow myself limited optimism," said Gylfi Magnusson, an economist at the University of Iceland.
Saturday’s snap election is taking place because the ruling coalition collapsed after just nine months in office following revelations that the prime minister’s father had vouched for the character of a convicted child molester. Another early election was held a year ago, when then Prime Minister Sigmundur David Gunnlaugsson was forced to resign in the face of yogurt-hurling protesters after being embroiled in the so-called Panama Papers scandal. In the 2013 vote, the centre-right took regained control of government from the centre-left amid capital controls imposed in the wake of the country’s banking crisis.
A booming tourism industry (it is now the country’s biggest export) and a general improvement in the global economy helped Iceland achieve a growth rate of 7.4% in 2016. After expanding for seven years running, the central bank is now expecting GDP to grow at 5.2% this year. With most capital controls now having being removed, the financial system no longer poses "significant systemic risks," Sedlabanki said in its most recent report.
Inflation has also been subdued, allowing for rate cuts and rising disposable incomes.
Benediktsson has vowed to cut taxes and invest in infrastructure.
"We have to defend the rise in purchasing power and maintain economic stability," he told state broadcaster RUV on the campaign trail.
His closest rival, Left Green leader Katrín Jakobsdóttir, wants to raise taxes on the rich to help finance increased public spending on infrastructure, health and education.
"We need to change working methods," she told RUV, adding "no one is talking about turning things upside down."
All parties agree on the need to build a new hospital.
Polls have placed the Left Greens’ natural allies, the Social Democratic Alliance, in third place, boosting their chances of being able to form a government even if they don’t gain the biggest share of the vote. The Independents’ traditional partners, by contrast, are lagging far behind while the Pirate Party, which had looked set to gain power in last year’s election, has seen its support dwindle.
Whatever the result on Saturday, it’s likely to take some time before a new government is formed (coalition-building talks lasted about two months the last time round).