Iceland PM, Sigmundur Davíð Gunnlaugsson Resigns after protests over Panama Papers revelations

Iceland’s embattled prime minister, Sigmundur Davíð Gunnlaugsson, has become the first major casualty of the Panama Papers, tendering his resignation amid a mounting political crisis over his family’s offshore investments.

A mass protest planned in Reykjavik later on Tuesday turned to celebration as Icelanders vented their anger at the outgoing prime minister following revelations that he had once owned – and his wife still owns – a secret offshore investment company with multimillion-pound claims on Iceland’s failed banks.

The agriculture and fisheries minister, Sigurður Ingi Jóhannsson, told state broadcaster RUV that Gunnlaugsson was resigning as prime minister and that he would be replacing him. Gunnlaugsson will, however, stay on as head of his Progressive party, Jóhannsson said.

The move requires the approval of both Gunnlaugsson’s junior coalition partner, the rightwing Independence party, and Iceland’s president, Ólafur Ragnar Grímsson. It was not immediately clear how the country’s other parliamentary parties would react. Early elections could still be a possibility.

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The prime minister, who has repeatedly denied any wrongdoing, had earlier sought to remain in office by asking to dissolve parliament and call new elections. But after the president turned him down, the prime minister met senior Progressive party officials and reportedly suggested himself that he step down.

The Independence party leader, finance minister Bjarni Benediktsson, was meanwhile in urgent talks on Tuesday evening with Grímsson, who flew back early from the US to sound out Iceland’s parliamentary party representatives as the island’s political crisis deepened.

Benediktsson, whose name also appeared in the leaked documents in connection with a Seychelles-based company of which he once owned a third, returned early from holiday in Florida on Tuesday. He had pointedly declined to back Gunnlaugsson on Monday, saying the leaks were a “heavy blow” to the government.
The leaked documents from the Mossack Fonseca law firm in Panama reveal Gunnlaugsson and his wife, Anna Sigurlaug Pálsdóttir, bought a British Virgin Islands-based offshore company, Wintris Inc, in December 2007 to invest her share of the very substantial proceeds from the sale of her father’s business, Iceland’s only Toyota importer.

Gunnlaugsson sold his 50% stake to his wife for a symbolic $1 at the end of 2009, eight months after he was elected to parliament as an MP for the centre-right Progressive party. He failed, however, to declare an interest in the company either then or when he became prime minister in 2013.

His office has said his shareholding was an error due simply to the couple having a joint bank account and that it had “always been clear to both of them that the prime minister’s wife owned the assets”. The transfer of ownership was made as soon as this was pointed out, a spokesman said. The prime minister also denies he was required to declare an interest.

The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.

But Gunnlaugsson’s political opponents and many ordinary Icelanders, more than 10,000 of whom staged a first mass protest outside parliament on Monday night, are outraged at what many see as an attempt by their prime minister – even if he has done nothing illegal – to hide money offshore.
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Such allegations are particularly incendiary in Iceland, which was brought almost to its knees in the financial crisis of 2008 by the recklessness of a small group of bankers and businessmen – several of whom are now in jail – who used offshore companies to conceal their dealings in high-risk financial products.

Plunged into a deep depression from which it has only recently recovered, Iceland had to be bailed out by the International Monetary Fund. It also introduced strict capital controls on the amount of money that could be taken out of the country – another reason why the question of offshore holdings inflames Icelandic opinion.

Gunnlaugsson is also accused of a serious conflict of interest for failing to disclose his involvement with the company.

Wintris held millions of pounds worth of bonds in Landsbanki, Glitnir and Kaupthing, the three big Icelandic banks that collapsed in the crisis with liabilities of more than 10 times the country’s GDP – and whose bankruptcies the prime minister’s government was responsible for overseeing.

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Opponents are also angered by what many Icelanders see as hypocrisy: Gunnlaugsson rose to power as part of a grassroots group called In Defence of Iceland, pledging to protect the country from its “vulture” foreign creditors and relieve the burden on ordinary Icelanders – and stressing how important it was to keep Icelandic assets in Iceland.

Gunnlaugsson has insisted he broke no laws and held no money offshore personally, and that he and his wife had always paid all their taxes in Iceland. His policies always put the Icelandic people first, he has insisted, and his family’s financial holdings “did not affect” his negotiations with the banks’ international creditors during the crisis.

“It’s been clear since before I began participating in politics that my wife had a considerable amount of money,” he wrote on his website recently. “Some people find that in itself very negative. I can’t do much about that because I’m neither going to divorce my wife nor demand that she relinquish her family inheritance.”

On Tuesday, however, members of Gunnlaugsson’s party called for him to resign. City councillors from his own constituency of Akureyri said he should step down over what they described as crisis of confidence.

Opposition MPs are much more outspoken. “People just feel humiliated and very, very angry,” said Birgitta Jónsdóttir of the radical Pirate party, which opinion polls currently estimate is the country’s largest with the support of between 35% and 42% of the electorate.

“After what happened to this country in 2008 we needed honesty, transparency and integrity from our leaders,” Jónsdóttir told the Guardian. “None of these things have been evident in this whole story.”

Árni Páll Árnason, leader of the opposition Social Democratic Alliance, said Gunlaugsson’s position was simply no longer tenable.

“I think it’s obvious that we cannot tolerate a leadership that is linked to offshore holdings,” Árnason said. “Iceland cannot be the only western European democratic country with a political leadership in this position.”

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