Icelandic PM Halldor Asgrimsson to Leave Post;

UNCLAS REYKJAVIK 000205

SIPDIS

SENSITIVE, SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL MARR IC
SUBJECT: Icelandic PM Halldor Asgrimsson to Leave Post;
Progressive Party in Trouble

REF: Reykjavik 196


1. (U) Summary: In a move apparently designed to
resuscitate his party's hopes of surviving 2007
parliamentary elections, Halldor Asgrimsson announced 6/5
that he would resign both as Icelandic Prime Minister and as
Progressive Party (PP) Chairman. The dates for his
departure remain unclear while the governing PP-Independence
Party (IP) coalition ponders options for shuffling the
cabinet and while PP stalwarts duke it out for leadership of
a party in crisis. One thing is sure: FM Geir Haarde will
be Iceland's next PM. Iceland's foreign policy will likely
continue on its current liberal internationalist course, but
a new Foreign Minister - as yet unnamed - could potentially
appoint a new defense negotiator to replace Albert Jonsson.
End summary.

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Problems for the Progressives
--------------

2. (U) Following a mysterious press leak and several days of
feverish speculation, Prime Minister Halldor Asgrimsson (PP)
told a press conference June 5 that he would resign his
government post in the coming days and his party
chairmanship at the next Progressive Party conference. He
announced that the PP Vice Chair, Minister of Agriculture
Gudni Agustsson, would also give up his party post; and
touted Finnur Ingolfsson, a former PP minister of industry
who now runs an insurance company, as his (Asgrimsson's)
preferred party successor as well as a potential Minister of
Finance.


3. (SBU) While Asgrimsson, PM since September 2004, thus
symbolically accepted responsibility for his party's poor
performance in May 27 municipal elections (reftel),his
noble gesture backfired in some quarters, as:

-- Agustsson, who remains popular especially with the
farmers who make up the PP's base, had second thoughts about
stepping down, indicating he instead might prefer to succeed
Asgrimsson as leader;

-- Ingolfsson came under intense criticism from opposition
politicians and media who recalled his reputation for
cronyism and corruption while in public office in the 1990s;
and

-- PP rank-and-file objected to Asgrimsson's attempt
effectively to choose his successor personally rather than
permit selection by the membership at large.


4. (SBU) Ingolfsson evidently read the tea leaves and,
within days, announced he would not seek leadership in the
PP. Intense speculation continues in Reykjavik as to
whether Agustsson is rightly Asgrimsson's heir. Minister of
Industry and Commerce Valgerdur Sverrisdottir (PP) said
publicly that she thought not, thus incurring the wrath of
self-appointed party unifiers but articulating the worries
of the many who view Agustsson, with his archaic Icelandic
and equine policy focus, as not up to the job. Other
contenders for the chairmanship include Minister of Health
Siv Fridleifsdottir, who is also a former Environment
Minister and known to be fiercely ambitious; and MP Jonina
Bjartmarz, an experienced lawyer repeatedly passed over by
Asgrimsson for ministerial slots - a history that led to a
PP gender gap. Bjorn Ingi Hrafnsson, Asgrimsson's protege
and new Reykjavik City Council Chairman, is considered not
yet ripe for the party chairman's job.


5. (U) A decision on Asgrimsson's PP successor will go to a
party conference originally scheduled for spring 2007, moved
to fall 2006 as the party contemplated last month's
disappointing results, and now tentatively scheduled for
this summer as the party scrambles to restore order to its
feuding ranks.

--------------
Opportunities for Independence
--------------

6. (SBU) In accord with the IP-PP 2003 coalition agreement,
Asgrimsson's resignation puts the IP Chairman, now FM Geir
Haarde, in the PM's chair. As ministers have been tied up
the week of June 5 hosting a Council of Baltic Sea States
summit, the Government announced that the consequent cabinet
reshuffle would not take place until the week of June 12.
Reykjavik's rumor mill has meanwhile gone to work
speculating on the likely replacement for Haarde at the
Ministry for Foreign Affairs.


7. (SBU) FM possibilities include:

-- Minister of Justice and Ecclesiastical Affairs Bjorn
Bjarnason, a former Minister of Education and son of a

previous Foreign and Prime Minister (Bjarni Benediktsson,
who negotiated the bilateral 1951 Defense Agreement on
behalf of Iceland). Bjarnason is a committed Atlanticist
and acknowledged security expert but has been among the
angriest members of the GOI about what he perceives as U.S.
"unilateralism" in announcing the closure of Naval Air
Station Keflavik.

-- Minister of Education Thorgerdur Katrin Gunnarsdottir,
who is vice chair of the Independence Party. Gunnarsdottir
has limited foreign affairs experience but is said to get
along a lot better personally with Haarde than does
Bjarnason.

-- Minister of Finance Arni Mathiesen, a former Minister of
Fisheries and another son of a cabinet minister. Though
respected for his brains and seriousness, Mathiesen is
actually a veterinarian by profession.

-- Minister of Fisheries Einar K. Gudfinnsson, known for his
strong support of commercial whaling.

Presumably none of these would owe the same debt of
gratitude as Haarde did to former IP Chairman (and Prime
Minister and Foreign Minister) David Oddsson. Thus
liberated, the new FM might feel free to replace Oddsson's
close friend Albert Jonsson as defense negotiator. Jonsson
told the Embassy June 7 that he expects to stay on as
Iceland's chief defense negotiator until he replaces Helgi
Agustsson as Iceland's Ambassador to the United States in
November 2006.

van Voorst