Iceland Pirates on Cusp of Power After Riding Yogurt Revolution

  • Iceland holds early parliamentary elections on Saturday
  • Polls point to opposition victory despite economic boom

All across Europe, young populist parties are knocking at the doors of power. In Iceland, they are on the cusp of succeeding.

Six months after protesters armed with bananas and skyr, a local kind of yogurt, forced their prime minister to resign, Icelanders plan to finish the job by voting out the country’s conservative government.

People gather in Reykjavik to demand elections on April 9.

Photographer: Halldor Kolbeins/AFP via Getty Images

Polls suggest Saturday’s snap election will produce a radically alternative ruling coalition spearheaded by the Pirate Party, a direct-democracy, open source movement first created in Sweden 10 years ago.

Populists everywhere have long been challenging the established political order by riding the anti-globalization wave. Should Iceland’s Pirates become the first to seize power, they would put Iceland in the vanguard of what Allianz SE chief economic adviser Mohamed El-Erian warned are spreading disruptions from the “politics of anger."

“The election will represent a landmark in terms of the political setup,” said Lars Christensen, an economist with Copenhagen-based consultant Market and Money Advisory who sees a Pirate Party-left coalition taking over after Saturday’s vote.

Click here for a description of Iceland’s main political parties.

For the continent’s mainstream politicians, it’s also a reminder that even economic success doesn’t guarantee victory at the ballot box. The two ruling parties, the Independence Party and the Progressive Party in particular, are struggling despite overseeing a turnaround in public finances, an imminent end to capital controls, an economic boom fueled by record tourism arrivals and a restoration of the country’s financial sector.

Managing Expectations

Bjarni Benediktsson, the country’s finance minister and leader of the Independence Party, concedes that the ruling coalition "won’t keep its majority." He said the rise of populism in Europe and the U.S. is partly fueled by the mistaken belief that politicians are responsible not only for people’s livelihoods, but also for their "happiness."

"We need to align expectations as to what can happen in the legislature and what kind of impact that can have" on people’s lives, he said.

True to their name, Iceland’s Pirates offer an unusual mix of policy ideas. They want a new constitution that promotes transparency, a fixed or pegged currency, a universal basic income, a French-style 35-hour working week, Icelandic citizenship for Edward Snowden, the decriminalization of drugs and a "fairer re-distribution" of the dividends from Iceland’s natural resources -- meaning higher taxes on fishing companies and mining multinationals such as Alcoa and Rio Tinto.

But it’s the core of their movement -- the idea that policy should be shaped by its members via online votes -- that makes the Pirates’ manifesto so difficult to assess.

"They seem to be all over the political spectrum, at least in terms of economics," Christensen, who was among the first to warn of Iceland’s crash in 2008, said in an interview.

Sensing the skepticism surrounding a possible Pirate government, Smari McCarthy, one of its three spokespeople, wants to reassure investors.

"We have realistic expectations toward what’s positive and what’s negative, so there won’t be any surprises," McCarthy told Bloomberg when asked about the party’s monetary policy.

No Revolution

McCarthy even defended the incumbent government’s controversial strategy toward U.S. funds trapped in Iceland following the 2008 collapse of the island’s three biggest banks.

“The current plans that are being implemented are quite good," McCarthy said.

Those expecting a revolution have other reasons to be disappointed.

Because of the profligacy of parties there, Icelandic governments are usually supported by coalitions in which compromise is the name of the game. Poll numbers and interviews with the leaders of the country’s main parties point to a four-party alliance led by the Pirates or the Left Green Movement and flanked by two smaller parties, the Social Democratic Alliance and A Bright Future.

"A normal first step would be for the opposition parties to work together in a coalition government," Left Green whip Svandis Svavarsdottir said in an interview.

At least seven parties are expected to overcome the 5 percent threshold required to enter the Althing, Iceland’s 1,000-year-old parliament, meaning post-election wrangling is likely to drag on for a while. It will be up to Gudni Th. Johannesson, the recently-elected president, to decide who should be given a mandate to become prime minister. The choice will not automatically fall on the leader of the biggest party, but on who is seen as having the strongest chance of forming a viable majority.

"It’s going to take a few days, at least," McCarthy said.

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