Identifier
Created
Classification
Origin
09REYKJAVIK75
2009-04-20 09:09:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Reykjavik
Cable title:  

ICELAND'S GOVERNMENT FEELING SECURE WITH ONE WEEK BEFORE

Tags:  PGOV PREL IC 
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TO RUEHC/SECSTATE WASHDC PRIORITY 4050
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEAIIA/CIA WASHDC
UNCLAS SECTION 01 OF 02 REYKJAVIK 000075 

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV PREL IC
SUBJECT: ICELAND'S GOVERNMENT FEELING SECURE WITH ONE WEEK BEFORE
ELECTIONS

UNCLAS SECTION 01 OF 02 REYKJAVIK 000075

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV PREL IC
SUBJECT: ICELAND'S GOVERNMENT FEELING SECURE WITH ONE WEEK BEFORE
ELECTIONS


1. (U) Summary: Polls continue to show Iceland's leftist minority
government with a strong lead one week ahead of national elections
on April 25. Though the official campaign may be less than a full
week due to an opposition filibuster that has kept parliament in
session, the Social Democratic Alliance and Left-Green Movement are
increasingly acting like they will get a renewed mandate. Adding to
Independence Party woes is the fallout from news of extremely large
(by local standards) political donations in 2006 on the eve of new
campaign finance limits. The damage is forcing the IP to
consolidate support from its base, rather than make an attempt to
pose a credible challenge to what would be Iceland's first leftist
majority government. At the same time, unease over the donations
scandal will mean the new government will have work to do in
reestablishing public confidence in the political system. End
Summary.


2. (U) Although the Icelandic Althingi (parliament) continues to
meet, the government coalition parties are gaining confidence with
just over a week before national elections on April 25. A
filibuster by the opposition Independence Party over constitutional
amendments has kept the Althingi in session closer to the date of
elections than at any other time in Icelandic history, but polling
data seems to show that the Social Democratic Alliance and
Left-Greens have not been damaged by the shortened campaign.


3. (U) The country's leading newspapers published their latest poll
results on April 16 and 17. Despite measuring significantly
different levels of support for the conservative Independence Party,
both polls show that the current SDA-LG minority government would
hold a majority in the Althingi. Frettabladid's April 16 poll
results showed the SDA and LG with 32.2 and 25.7 percent,
respectively, while Morgunbladid's Gallup poll released on April 17
had the two parties at 30.7 and 28.2 percent. Independence
supporters found something to cheer in the Frettabladid results
showing 27.3 percent support, which implied that a campaign finance
scandal has done little harm to the party. However, the next day's
Gallup poll showed the IP dropping to 23.3 percent nationwide, down
from 36.6 in the 2007 elections.


4. (U) Variances aside, the polls were in agreement on three
points. The new Citizens' Movement is inching closer to the 5

percent threshold needed to get an MP elected. Meanwhile, support
for the Progressive Party continues to hold stagnant around seven
percent, meaning that after an initial bounce the party's new
leadership has made no inroads with the public. Finally, the
idiosyncratic Liberal Party is in a quagmire at around one or two
percent and is clearly not going to win any seats in parliament this
year, meaning the party will probably be dissolved in the near
future.


5. (SBU) Reflecting the news from the polls, leftist politicos have
been increasingly upbeat in meetings with embassy officials in
recent days. Debate now centers on whether or not the Left-Greens
will suffer what has been a traditional collapse of support in the
last days before national elections (in 2007, they lost 10 percent
in the last month of the campaign). If the current numbers hold,
the IP could see itself fall to an historic low as Iceland's
third-largest political party.


6. (U) Independence Party malaise has only deepened over the last
week as news emerges regarding political donations made under
Iceland's previous campaign finance regime. Easter weekend
headlines were dominated by reports that in 2006 the IP accepted
millions of ISK in donations from FL Group (ISK 30 million, $238,000
at current exchange rates, or $415,000 at the time) and Landsbanki
(ISK 25 million/$198,000/$346,000) only a few days before Iceland's
first campaign finance law took effect on January 1, 2007. Once the
scandal broke on April 8, former IP chairman Geir Haarde immediately
sent out a statement saying that he took full responsibility for
accepting the donations, though many feel that Haarde was trying to
shield the rest of the party from blame only two weeks before
national elections.


7. (U) The fallout continued on April 10, when the party's
Secretary General Andri Ottarsson resigned, although he claimed to
have had no knowledge of the donations (Ottarsson was hired by the
IP in mid-2006). MP and former Minister of Health Gudlaugur Thor
Thordarson took the most heat, and he was forced to retract his
categorical denials of any involvement. Reports have surfaced that
put Thordarson at the center of IP fundraising efforts in late 2006,
and he is said to have been pressured to resign from the Althingi or
yield his seat at the top of one of the Reykjavik Constituency lists
to a candidate less tainted by scandal. Thordarson's political
position has since improved after a slate of his allies was
re-elected to the leadership of the IP's Reykjavik chapter, and it
is unlikely he will be leaving the stage.


8. (U) The other three major parties were quick to disclose
information about where the sources of their donations in 2006. The

REYKJAVIK 00000075 002 OF 002


Progressive Party (PP),which was in government with the IP in 2006,
initially claimed that privacy concerns prevented it from releasing
information about its donors under the old law. It quickly relented
and released a breakdown of ISK 23.5 million ($187,000 at current
exchange rates, or $326,000 at the time) in donations that were over
ISK 1 million each. Of those the largest donation was ISK 5 million
from the contractor Eykt, and ISK 4 million from Kaupthing Bank. A
third of the ISK 23.5 million came from companies associated with
the so-called "S" group (a holding company made up of three leading
insurance and retirement savings firms) and another third from large
contractors and construction firms.


9. (U) The SDA's disclosures confirmed for many the party's close
ties with the Baugur Group, long a bugaboo of the Independence
Party. The SDA received a total of ISK 45 million ($357,000 at
current exchange rates, or $625,000 at the time) in 2006. Donations
over ISK 500 thousand amounted to ISK 36 million. Of those the
largest donation was ISK 5 million from Kaupthing bank and ISK 4
million from Landsbanki. Of the ISK 36 million in large donations,
25 percent came from companies associated with the Baugur Group, and
slightly smaller amounts from the S-Group and father-son investors
Bjorgolfur Gudmundsson and Bjorgolfur Thor Bjrgolfsson,
respectively.


10. (U) The LG issued a statement saying that the party's
accounting had always been open to the public and that the largest
donation in 2006 was ISK 1 million ($8,000 at current exchange
rates, or $14,000 at the time),from the insurance company
Samvinnutryggingar (one of the S-group companies).


11. (SBU) Comment: The campaign contributions scandal has taken a
toll on the IP in the short term at least, according to the latest
Gallup poll, but it remains to be seen whether brouhaha will remain
fresh in the minds of voters on Election Day. Many wonder what
hardcore IP supporters will do given their lack of alternatives on
the right end of the spectrum. Rumors are swirling that many will
turn in a blank vote rather than support a party that has failed to
adequately deal with the past and has missed repeated opportunities
to put forth a new generation of candidates. If IP support drops
below 20 percent, the base's dissatisfaction will be clear. In
these conditions, anything above 25 percent will be a relative
victory for new IP Chair Bjarni Benediktsson.


12. (SBU) Comment, cont'd: Many point out that the SDA and PP also
received donations from large corporations, but not nearly as high
as the IP. This has shielded them from taking the same level of
criticism, although commentators wonder why the political parties do
not disclose financial information reaching further back than 2006,
which naturally begs the question of what there is to hide. The
Citizen's Movement's jump in the polls may be a reflection of
growing dissatisfaction with the party system and a sense that all
of Iceland's parties are tainted. Although voters may put the SDA
and LG back in power on April 25, they will have some work ahead of
them to turn a sense of resignation into enthusiastic support for
the government. End Comment.

VAN VOORST