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In an April 2011 referendum, Icelanders voted against a repayment deal to British depositors at an Icelandic bank, which had collapsed during the country’s banking crisis of 2008. Meanwhile, a new draft constitution was presented to parliament in July.
After gaining independence from Denmark in 1944, Iceland became a founding member of NATO in 1949, despite having no standing army. The country declared itself a nuclear-free zone in 1985. Davíð Oddsson of the center-right Independence Party (IP), first elected prime minister in 1991, finally stepped down in 2004. He was succeeded by Halldór Ásgrímsso of the Progressive Party (PP), the coalition partner of the IP. After a poor government showing in local elections, Ásgrímsso resigned the premiership in favor of the IP’s Geir Haarde in June 2006.
The ruling coalition broke up following May 2007 parliamentary elections, in which the IP took 25 seats and the PP captured 7 seats in the 63-seat legislature. The IP then formed a new coalition with the center-left Social Democratic Alliance (SDA), which held 18 seats, and Haarde returned as prime minister. A credit crisis forced the government to nationalize three large banks in 2008, resulting in widespread protests and Haarde’s resignation on January 26, 2009.
In February 2009, Jóhanna Sigurðardóttir of the SDA was named interim prime minister. Her center-left coalition, consisting of the SDA and the Left-Green Movement, captured 34 of 63 seats in early parliamentary elections in April 2009, marking the first time leftist parties have held a majority in Iceland. The elections also resulted in the highest number of first-time members and the largest percentage of women in parliament in Iceland’s history. A government shakeup in September 2010 reduced the number of cabinet seats from 12 to 10.
While the majority of Icelanders remain opposed to European Union (EU) membership, the country opened EU accession negotiations in July 2009. Negotiations were ongoing at year’s end.
The anti-establishment Best Party, led by comedian Jón Gnarr, rode a wave of protest votes to capture 6 of the 15 seats in the May 2010 Reykjavik City Council election, making Gnarr mayor of the Icelandic capital.
In April 2011, voters defeated a referendum on a repayment plan for British and Dutch and Dutch depositors at Icesave, an online savings account brand owned and operated by the private Landsbanki, which collapsed in 2008. An international court case to resolve the issue was being prepared by year’s end. In September 2011, Landsbanki announced that a sale of its assets should fully cover repayment to all British and Dutch depositors. The sale of assets was ongoing at year’s end.
In January 2011, the Supreme Court invalidated the November 2010 Constitutional Assembly election due to various irregularities, including a lack of voting secrecy at polling stations. However, parliament subsequently ruled that the 25 officials elected to the assembly could serve on a similar Constitutional Council, which would allow them to continue revising the country’s constitution. In July 2011, the Constitutional Council submitted to parliament a draft of a new constitution, which emphasizes transparency of information and respect for natural resources and human rights. A referendum on the new draft was expected in 2012.
Iceland is an electoral democracy. Elections are free, fair, and competitive. The constitution, adopted in 1944, vests power in a president, a prime minister, the 63-seat unicameral legislature (the Althingi), and a judiciary. The president, whose duties are mostly ceremonial, is directly elected for a four-year term; Ólafur Ragnar Grímsson was reelected president in the 2008 elections. The legislature is also elected for four years, but it can be dissolved for early elections in certain circumstances. The prime minister is appointed by the president but responsible to the legislature.
The center-right IP dominated politics until May 2009, when Jóhanna Sigurðardóttir’s center-left coalition took power. Six major political parties and several smaller parties are represented in the Althingi.
While corruption not a serious problem in Iceland, the country has experienced politically tinged business-fraud scandals in recent years. In 2010, Steinunn Valdís Óskarsdóttir of the SDA stepped down after it was revealed that she had accepted large corporate donations for her 2006 campaign. A number of bankers—including former director of Kaupthing Iceland, Ingólfur Helgason—were arrested in 2010 in connection with the Icesave banking crash in 2008. Several members of parliament were also implicated in the crash, including former prime minister Geir Haarde, who faced charges of negligence in the wake of the financial crisis. Some of the charges against Haarde were dismissed because the wording “gross neglect of duty” was considered too vague, while the remaining charges were still being processed by year’s end. Iceland was ranked 13 out of 183 countries surveyed in Transparency International’s 2011 Corruption Perceptions Index.
The constitution guarantees freedom of speech and of the press. In June 2010, parliament unanimously passed the Icelandic Modern Media Initiative, which mandates the establishment of stringent free speech and press freedom laws with a focus on the protection of investigative journalists and media outlets. Iceland’s wide range of print publications includes both independent and party-affiliated newspapers. The autonomous Icelandic National Broadcasting Service competes with private radio and television stations. Private media ownership is concentrated, with the Norðurljós (Northern Lights) Corporation controlling most of the private television and radio outlets and two of the three national newspapers. Internet access is unrestricted.
The constitution provides for freedom of religion. Almost 90 percent of Icelanders belong to the Evangelical Lutheran Church. The state supports the church through a special tax, which citizens can choose to direct to the University of Iceland instead. A 2008 law requires the teaching of theology in grades 1 through 10. Academic freedom is respected, and the education system is free of excessive political involvement.
Freedoms of association and peaceful assembly are generally upheld. Peaceful protests occurred in September and October 2011 against IMF austerity measures and the government’s failure to protect Icelanders from housing foreclosures. Many nongovernmental organizations operate freely and enjoy extensive government cooperation. The labor movement is robust, with over 80 percent of all eligible workers belonging to unions. All unions have the right to strike.
The judiciary is independent. The law does not provide for trial by jury, but many trials and appeals use panels of several judges. The constitution states that all people shall be treated equally before the law, regardless of sex, religion, ethnic origin, race, or other status. Prison conditions generally meet international standards.
The Act on Foreigners was amended in 2004 to allow home searches without warrants in cases of suspected immigration fraud, among other changes. Foreigners can vote in municipal elections if they have been residents for at least five years, or three years for citizens of Scandinavian countries. In September 2010, a father and son of Cuban origin who had held Icelandic citizenship for more than a decade fled the country after intense racially-motivated intimidation. Approximately 1,000 people gathered for an anti-racism rally in the same month in response to threats received by the family.
Women enjoy equal rights, and more than 80 percent of women participate in the workforce. However, a pay gap exists between men and women despite laws designed to prevent disparities. In 2009, Sigurðardóttir became Iceland’s first female prime minister and the world’s first openly homosexual head of state. Women hold nearly 43 percent of seats in parliament, the highest number in the country’s history, and Iceland topped the World Economic Forum’s 2011 ratings on gender equality. The government participates in the Nordic-Baltic Action Group against Human Trafficking. A committee was appointed in 2008 to develop new strategies to combat human trafficking in Iceland, and in April 2009, parliament passed a law criminalizing human trafficking.