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O 271117Z APR 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4059
INFO RHEHNSC/NSC WASHINGTON DC IMMEDIATE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 REYKJAVIK 000081 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR DAS GARBER, EUR/NB 
NSC FOR HOVENIER 
 
E.O. 12958: N/A 
TAGS: PGOV PREL IC
SUBJECT:  ICELAND: SOCIAL DEMS IN DRIVER'S SEAT AFTER ELECTION 
VICTORY 
 
¶1.  (SBU) Summary:  Icelandic Prime Minister Johanna 
Sigurdardottir's Social Democratic Alliance (SDA) came away with a 
clear victory in parliamentary elections on April 25, winning nearly 
30 percent of the vote.  The SDA now holds a commanding position in 
coalition talks, as their Left-Green (LG) partners in the current 
minority government suffered a last-minute fade and slipped to third 
behind the conservative Independence Party.  A surprisingly strong 
performance by two other pro-EU parties means the SDA could abandon 
the LG in favor of an "EU Government," and Sigurdardottir is plainly 
using this fact as leverage in negotiations with the Euro-skeptic 
Left-Greens.  Although the SDA and LG will probably stay together to 
create Iceland's first leftist majority government, the LG will 
likely be forced to move towards Brussels.  Though the LG may demand 
some concessions in exchange, these are likely to be on domestic 
welfare and economic issues rather than foreign affairs, which are 
problematic given the LG's anti-NATO platform.  Aware that time is 
on their side, the SDA will probably drag out the announcement of a 
new government to ratchet up the pressure on their would-be 
partners.  End Summary. 
 
¶2.  (U) As anticipated, Iceland's Social Democratic Alliance (SDA) 
came away from national parliamentary elections on April 25 with the 
largest share of the vote.  In its best performance since its 
founding a decade ago, Prime Minister Johanna Sigurdardottir's party 
won just shy of 30 percent of the vote and will hold 20 seats in the 
63-member Althingi.  Sigurdardottir proclaimed the results a clear 
signal that the public trusts the SDA to pull Iceland out of its 
economic difficulties, while also claiming that the SDA's desire to 
apply for EU membership played a key role.  The SDA focused its 
message almost entirely on the EU question in the final three days 
of the campaign, arguing that the simple act of applying for 
membership would bring needed credibility to Iceland's economic 
recovery efforts. 
 
¶3.  (U) Saturday's results were an unwelcome surprise for Finance, 
Agriculture and Fisheries Minister Steingrimur Sigfusson's 
Left-Green Movement (LG), which lost nearly six percent from the 
final pre-election opinion polls.  Although the LG's 22 percent 
share of the vote increases their Althingi delegation from nine 
seats to 14, the party had clearly hoped for more and struggled to 
spin the results as a victory rather than a disappointment. 
Commentators were quick to remind that the LG has historically 
suffered from last-minute electoral collapses, and pointed to 
several ill-advised statements by Left-Green ministers in the waning 
days of the campaign.  Party Chair Sigfusson reportedly said at an 
event on April 23 that leading airline Icelandair might have to be 
nationalized, then quickly backtracked via a Ministry of Finance 
press release, while Minister of Environment Kolbrun Halldorsdottir 
criticized oil exploration efforts in the Dreka Region off Iceland's 
northeast coast and said the country should explore wind power 
instead.  Taken together, the statements may have raised doubts in 
voters' minds about the LG's long-term abilities to rebuild 
Iceland's economy.  The party's downturn was particularly hard on 
MinEnv Halldorsdottir, who was not reelected to parliament. 
 
¶4.  (U) Combined with the Left-Green collapse, three other parties 
defied expectations.  The conservative Independence Party, though 
clearly suffering voters' wrath over the economic collapse and 
government breakdown in January, did slightly better than 
anticipated and only fell to second place behind the SDA.  The 
Progressive Party (PP), which struggled for much of the spring to 
find a compelling campaign narrative, nonetheless managed to gain 
three percentage points over the final pre-election polls and adding 
two MPs.  Combined with the surprising run of the new Citizens' 
Movement, which took four Althingi seats in its maiden campaign 
effort, the Progressives' success may actually reflect a growing 
preference for EU membership more than anything else.  Both the PP 
and Citizens' Movement have endorsed EU accession as a solution to 
Iceland's economic woes, and as such may have benefitted from the 
SDA's focus on the issue and the LG's push-back from Brussels. 
 
¶5.  (U) Final election results were as follows, with comparison to 
the 2007 elections: 
 
SDA = Social Democratic Alliance 
IP = Independence Party 
LG = Left-Green Movement 
PP = Progressive Party 
CM = Citizens' Movement 
LP = Liberal Party 
MD = Movement for Democracy 
 
Party Percent  MPs Change 
       (MPs) 
 
 
REYKJAVIK 00000081  002 OF 002 
 
 
SDA  29.8  20 +2 
IP  23.7  16 -9 
LG  21.7  14 +5 
PP  14.8  9 +2 
CM   7.2  4 -- 
LP   2.2  0 -4 
MD   0.6  0 -- 
 
Note:  The Althingi (parliament) has 63 members. 
 
 
¶6.  (SBU) Party chairs began staking out their negotiating positions 
immediately, with SDA Chair Sigurdardottir announcing simultaneously 
that she would be happy to see the SDA-LG government continue, but 
also that a majority had voted for pro-EU parties and that the new 
government needed to reflect this.  The LG instead chose to spin the 
results as a nationwide move to the left and an endorsement of the 
current government's economic policies, with LG Chair Sigfusson 
going so far as to say on a Sunday night roundtable that only 
Iceland's "elite" wants EU membership.  Progressive Chair Sigmundur 
David Gunnlaugsson, meanwhile, tried to avoid sounding desperate as 
he enthusiastically backed Sigurdardottir's suggestion that an 
SDA-PP-CM majority could coalesce around the objective of an EU 
membership bid. 
 
¶7.  (SBU) Coalition talks began on the afternoon of April 26, with 
PM Sigurdardottir and LG Chair Sigfusson meeting at Sigurdardottir's 
residence for informal discussions.  Sigurdardottir said after the 
talks that they had covered the policies of the parties in general, 
including their positions on EU membership.  At the televised 
post-elections roundtable later that night, both Sigurdardottir and 
Sigfusson admitted that the EU membership question was the most 
difficult issue that the SDA and the LG had to solve in their 
coalition negotiations.  The SDA and LG parliamentary groups will 
meet today where the party leaders will seek a mandate from their 
respective parties to continue the coalition talks.  From a 
technical perspective, PM Sigurdardottir still holds the mandate to 
lead the government.  As such, the SDA and the LG do not have to 
meet with the President of Iceland to renew their mandate, but 
Sigurdardottir will do so out of courtesy on the afternoon of April 
¶27. 
 
¶8.  (SBU) Comment:  Looking ahead, the SDA will use the electoral 
results as leverage to force the LG to come around on the EU 
question.  SDA parliamentarians have underscored the importance of 
applying for EU membership and are not keen on budging from that 
stance.  Additionally, there is now a parliamentary majority for EU 
membership given that the SDA, the PP, the Citizens' Movement, and 
even a portion of IP MPs are willing to start accession negotiations 
with the EU.  This puts the LG in a very difficult negotiating 
position. 
 
¶9.  (SBU) Comment, cont'd:  Given the Left-Greens' evident desire to 
be part of Iceland's first leftist majority government, they will be 
under great pressure to yield to SDA demands on the EU question.  In 
exchange, they may demand some face-saving concessions, most likely 
on economic, welfare, or environmental issues.  This could mean a 
more difficult landscape for would-be investors in heavy industry, 
e.g. aluminum.  However, there are few indications that the 
Left-Greens will press on core foreign policy issues, such as their 
desire for Iceland's withdrawal from NATO.  LG insiders have noted 
to post that the party's foreign policy is lacking in depth, and 
that a push on foreign policy priorities would likely reveal splits 
between pacifist and neutralist elements within the LG.  In any 
event, time is on the SDA's side, and we anticipate that 
Sigurdardottir may draw out coalition talks as a way of increasing 
public pressure on the LG to give on the EU membership issue. 
 
VAN VOORST