Iceland. In January, Iceland gained a new government,
more than two months after the parliamentary elections.
Bjarni Benediktsson, leader of the Conservative Independence
Party, became prime minister of a coalition with the two
small liberal parties the Reform Party and the bright
future. The government had the smallest possible majority in
the parliament, 32 out of 63 seats.
One of the coalition's most difficult issues concerned
Icelandic membership in the EU. After the bank crash in
2008, Iceland began to negotiate membership but withdrew its
application in 2015. The two liberal parties in the
government want EU membership, but the Independence Party
says no. The compromise was to allow the Parliament to
decide whether to hold a referendum on future Icelandic EU
Countryaah.com, the new government had to take over an economy on the
rise, eight years after the bank crash and deep financial
crisis. The credit rating agency Standard & Poor's raised
Iceland's credit rating from BBB + to A- in January, and in
March the country received the rating A. The foreign
exchange reserve had grown, the central government debt had
fallen from 57% of GDP to 42% in two years, and the trade
balance showed significant surpluses, among other things
thanks being an almost exploding tourism industry. During
the year, Iceland was expected to receive close to two and a
half million tourists from outside, compared with just under
half a million in 2009.
Figures in March also showed that Iceland has reached its
highest growth rate in ten years. In the last quarter of
2016, GDP had risen by 11.3% compared to the corresponding
period last year. Growth for the whole year was 7.2%. For
2017, lower growth was forecast, around 3.5%, partly due to
the strong krona.
In March, the government decided to abandon the last of
the capital controls that were introduced after the banking
crash in 2008. This allowed the free movement of capital
again for individuals, companies and pension funds.
In March, the government presented a bill that obliges
companies with more than 25 employees to show that everyone
gets equal pay regardless of gender, ethnicity or sexuality.
The hope is that the gender pay gap will be erased by 2022.
In March, Iceland and Norway decided to increase their
political cooperation in response to Britain's plans to
leave the EU. The British negotiations on leaving the Union
are expected to lead to changes also in other non-members'
relations with the EU. Iceland and Norway therefore want to
do a common thing to safeguard their interests.
In April, the Minister of Finance declared that the
government is considering tying the krona into a leading
currency, probably the euro. The reason was the risks of
overheating the economy in the wake of the growth of the
tourism industry and the fact that the krona increased in
value against the dollar.
In June, everything was approved by an overweight vote in
the government's budget plan for the next five years. The
central bank lowered the key rate several times during the
year, and at mid-year it was 4.5%.
In September, the government split. The bright future of
the party left the coalition and accused Prime Minister
Bjarni Benediktsson of corruption by darkening a story about
a sex offender. The prime minister had not informed the
coalition parties that it was his father who had written a
recommendation that a previously convicted sex offender
should be cleansed. The case was very controversial, as the
convicted man abused his stepdaughter for twelve years. The
Prime Minister's party friend, the Minister of Justice, had
revealed to the Prime Minister that his father had written
the recommendation, but none of them had passed on the
The scandal led the government to resign, nine months
after taking office, and new elections were announced until
the end of October. New revelations showed that during the
banking crisis in 2008, Bjarni Benediktsson sold fund shares
for approximately SEK 9 million just before an Icelandic
bank was nationalized. Although it was not criminal insider
trading, the information was troublesome for him in the
The Independence Party went back in public opinion, while
the Left – Greens looked to be clear victors in the
election. Left leader Katrín Jakobsdottír was expected to
become prime minister for a coalition with his party and the
Social Democrats and the Pirate Party.
But in the end, the Left – Green Party was almost halved,
while the Independence Party withdrew land and became the
largest in the election with just over 25% of the vote. The
Left – The Greens had to settle for just under 17%. The
Social Democrats got just over 12%, the newly formed Center
Party with former Prime Minister Sigmundur Davíð
Gunnlaugsson in the lead 11.5, the Progress Party just under
11 and the Pirate Party just over 9%.
The election result made it difficult to create a
majority government. Leftist leader Katrín Jakobsdóttir was
commissioned by President Guðni Jóhannesson to negotiate a
left-wing coalition, but the talks failed. Instead, she
formed a cross-border coalition with the Left – the Greens,
the Middle Progress Party, and the Conservative Independence