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Iceland Social Democrat Government Survives No Confidence Vote

April 14 (Bloomberg) -- Iceland’s Social Democrat-led government survived a parliamentary vote of no confidence yesterday, with 32 lawmakers in the 63-member Althingi backing the coalition.

Twenty-nine opposition lawmakers supported the no-confidence vote, joined by one legislator from the Left Green Movement, a partner in the ruling coalition, according to the results posted on the Althingi’s website. One opposition lawmaker abstained.

“We’re bringing the government a message from the nation, stating that it’s no longer trusted,” Bjarni Benediktsson, chairman of the opposition Independence Party, told the Reykjavik-based parliament yesterday when he presented his motion to topple the government. “However, this isn’t only about the government. With a demand for general elections, we’re offering a new beginning and giving the people of Iceland a choice on what route to take out of the circumstances we’re now facing.”

Benediktsson wanted the parliament to be suspended on May 11 and general elections held immediately after that, he said. Polls indicate that if elections were held now, his bloc would be expected to win.

The Independence Party, which presided over the privatization of Iceland’s banks through the 1990s, is the country’s most popular political group, according to an April 4 poll by Capacent Gallup. The party, whose 18-year rule was brought to an end by Iceland’s 2008 financial crisis, enjoyed 35.8 percent support in the poll, compared with 22.4 percent backing for Prime Minister Johanna Sigurdardottir’s Social Democrats.

‘Libertarianism, Greed’

The same poll gave the Social Democrat-Left Green coalition 39.3 percent support, compared with 54.3 percent backing for the opposition.

“We were handed the bankruptcy of libertarianism and greed after one of the greatest bankruptcy of all times,” Sigurdardottir told lawmakers in Reykjavik yesterday. “The government’s task has been winding down the collapse and creating opportunities for progress. I assert that we’ve been successful.”

Iceland faces a yearlong international court battle as the U.K. and the Netherlands try to ensure that they are repaid after covering depositor claims stemming from the failure of Landsbanki Islands hf in 2008. The outcome of the legal dispute is “clearly uncertain” while the economic impact of the process is “extremely hard to quantify,” Danske Bank chief analyst Lars Christensen said this week.

Court Battle

In a referendum on April 9, almost 60 percent of voters rejected a bill setting the terms for compensating the British and Dutch governments. The vote was triggered by President Olafur R. Grimsson’s Feb. 20 decision to veto the bill, even though it had been approved by the government and passed by a two-thirds majority in the Althingi.

The European Free Trade Association’s Surveillance Authority in May last year started infringement proceedings against Iceland under its obligation to cover all depositor claims. Those proceedings, which had been halted during Iceland’s parliamentary handling of Icesave -- as the deposit accounts offered by Landsbanki were called -- will now be resumed.

To contact the reporter on this story: Omar Valdimarsson in Reykjavik at valdimarsson@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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