Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson resigned on Tuesday, after documents leaked from a Panama-based law firm revealed that his wife possesses a secret offshore account worth millions of dollars.
The money is housed in a shell corporation called Wintris, which had bought bonds in Icelandic banks. So when Iceland's financial sector collapsed in 2008, Wintris became a creditor to those banks. In 2013, Gunnlaugsson became the prime minister, having run partly on a promise to get tougher with Iceland's remaining foreign creditors.
So what Icelandic voters didn't know when they elected him in 2013, but have learned with this week's "Panama Papers" revelations, is that Gunnlaugsson's own wife was secretly one of the creditors he'd promised to crack down on — an enormous and undisclosed conflict of interest.
When the truth came out this week, it led to mass protests on Monday calling for Gunnlaugsson's resignation. He stepped down the next day.
What happened in Iceland shows the political power of the Panama Papers, but it also shows the degree to which the political turmoil from the 2008 financial crisis is, in some ways, still ongoing in that country.
What's more, if Gunnlaugsson's resignation leads Iceland to schedule new elections soon, that vote could end up empowering a radical political party called the Pirate Party, a left-libertarian amalgam that's obsessed with transparency and direct democracy.
Here's what you need to understand the Iceland situation: what happened, why it matters, and what could happen next.
How the financial crisis changed Iceland's politics
From the mid-'90s until the 2008 financial crisis, Iceland engaged in a grand experiment. It slashed the size of government and downgraded financial regulations, hoping to grow Iceland's economy and make it into a hub for global finance really quickly.
At first, it seemed to work — Iceland's GDP per capita skyrocketed from $27,000 to about $69,000 in 2008. Inequality also surged, and the financial system seemed riven by corrupt backroom dealings, but it seemed to many like a reasonable price to pay.
Icelandic banks promised depositors high interest rates while they spent heavily on purchasing new assets. Bankers took out loans from abroad, lent the money to each other, and used it to buy assets whose prices became more and more inflated. This gave the appearance of rapidly ballooning wealth, but built on little more than paper.
Michael Lewis, the great financial journalist, explains it like this:
You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets.
This was a bubble set to pop, and so it did in 2008 when the global financial system on which it depended began falling apart. The banks began failing, and Iceland faced a difficult choice about how to respond.
The effect on Iceland was dramatic. As the Washington Post's Matt O'Brien explains, the government itself took on enormous debt to cover its citizens' deposits:
Iceland's government couldn't afford to bail out its banks that had gotten so much bigger than its economy. The only choice was to let them go under. In other words, Iceland's banks were too-big-not-to-fail. That was a lot easier, though, when letting the banks fail meant letting foreigners lose their money. Iceland's government, you see, guaranteed its own people's deposits, but no one else's. But now it was Iceland's government that needed a bailout.
This got really bad. The stock market lost 95 percent of its value; unemployment shot up from under 2 percent to over 8 percent. GDP per capita fell by nearly $30,000.
"No other developed country endured a systemic collapse in its banking sector on the scale that occurred in Iceland," Icelandic scholars Throstur Olaf Sigurjonsson and Mar Wolfgang Mixa write. In fact, they write, a collapse of this scale had occurred "rarely in the history of finance."
The political fallout was immediate and dramatic. Iceland's center-right party, which had masterminded the country's financial liberalization, lost power to a left-wing coalition in February 2009. The new left-wing government began rebuilding Iceland's regulatory and welfare state and securing an international bailout.
It was that last point that enabled Gunnlaugsson's later rise. For much of his career, he had been a kind of pop journalist, placing third in the 2004 "sexiest man in Iceland" competition. During the financial crisis, Gunnlaugsson had moved into activism — leading a right-wing group called InDefence, short for In Defense of Iceland, which opposed the bailouts.
Gunnlaugsson and InDefence argued that Iceland should stand up to its international creditors to limit the amount of money Iceland would have to pay them.
A key moment in their campaign came in 2008. At the time, as the International Consortium of Investigative Journalists (ICIJ) explains, the UK was demanding money from Iceland — a lot of Brits had had money in collapsing Icelandic banks, and the UK wanted to make sure its citizens got their deposits back. Iceland refused, and the UK invoked a counterterrorism law to try to seize the money from them.
Gunnlaugsson's group rallied against this, using the slogan "Icelanders are NOT terrorists." When Iceland received its international bailout, the group opposed taking any British money — and won, forcing Iceland's government to accept bailout funds only from and other Scandinavian countries and the IMF.
Gunnlaugsson was tapping into a sentiment of Icelandic nationalism. Many Icelanders believe the financial crisis had already punished their country enough, and that the people shouldn't have to pay back foreign creditors. He rode this wave to political power, winning a seat in parliament in 2009 and ultimately the premiership in 2013 election as the leader of the right-wing Progressive Party.
Standing up to the creditors was the core of Gunnlaugsson's political appeal; if he hadn't had that, then he might not have ever won power. And that's why the Panama Papers release was so damaging to him.
The Panama Papers revealed Gunnlaugsson's wife had a shell company
In Iceland, the biggest revelations in this week's Panama Papers focused on Wintris, the shell company Gunnlaugsson's wife, Anna Sigurlaug Pálsdóttir, used to hide millions of dollars in offshore account.
Wintris was created in 2007 in the British Virgin Islands, as a dual investment by Pálsdóttir and Gunnlaugsson. (While shell companies are often used for activities such as avoiding taxes, they are not necessarily illegal.)
In 2009, when he was elected to parliament, Gunnlaugsson was legally required to either disclose or sell his interest in Wintris. He chose the latter, selling it to his wife for $1, a single day before Icelandic law would have required him to disclose its existence.
A lot of this was known in Iceland before the rest of the world found out. On March 15, after Gunnlaugsson started getting questions about whether he'd ever had an offshore account, Pálsdóttir wrote a Facebook post disclosing the existence of Wintris and thus her offshore investments.
Then the ICIJ, which first reported the papers, found that Wintris was claiming about $4.2 million in bonds from Iceland's three main commercial banks — Landsbanki, Kaupthing, and Glitnir.
So Gunnlaugsson's wife has money in a shell company, which was initially started as a joint investment with her husband, that claims to be owed money from the very Icelandic banks over which her husband's government has some legal authority — and that are among the foreign creditors he'd promised to get tough on.
The people of Iceland reacted by throwing yogurt at parliament
Gunnlaugsson's government, a center-right coalition of his libertarian Progressive Party and the more conservative Independence Party, was already in trouble before the new information about Wintris.
Some of its recent political problems:
- Iceland saw widespread union strikes over wages in 2014 and 2015, including among nurses. Parliament eventually passed legislation to stop the nurses' strike and force the nurses to return to work after more than two months.
- Iceland dropped its European Union membership bid in 2013, and recently announced that the country was officially no longer a candidate. This wasn't a surprise — skepticism of Europe was cited as a major reason for its victory in the first place — but opponents argued the matter should have been put to a referendum or a parliamentary vote.
- The government proposed putting power lines, dams, and power plants in the untouched Icelandic highlands. Environmentalists protested, and Björk made a public appeal to stop the development.
A slow leak of shell company revelations, all from the Panama Papers, built on these problems. The Icelandic broadcaster RUV, in a story published March 29, said that three ministers in the Icelandic government were involved with offshore accounts (and could have tipped off the rest of the world that similar disclosures were coming, if anyone had been paying attention).
The minister of the interior, Ólöf Nordal, had an offshore company founded for her husband but never used, according to Süddeutsche Zeitung. And the minister of finance, Bjarni Benediktsson, held 33 percent of a shell company in the Seychelles, which he said was founded to purchase real estate in Dubai.
So many in Iceland saw the final revelations as part of a trend of malfeasance. In the wake of the leaks, at least 10,000 people — in a country of only 330,000 — turned out to protest in front of parliament, throwing yogurt and blowing whistles in one of the largest protests in the country's history.
Gunnlaugsson initially vowed to stay on. But on Tuesday he bowed to the pressure, resigning his job.
An opportunity for Iceland's Pirate Party?
Gunnlaugsson's coalition is vowing to remain in power, which would require choosing a new prime minister. But opposition parties are calling for Iceland's president to dissolve parliament, which would mean new elections.
Currently, the highest-polling party in Iceland is the Pirate Party, with 37.8 percent. It's part of an international protest group that emphasizes transparency and copyright reform. Its somewhat opaque agenda embraces left and libertarian ideas such as:
- Reducing the role of Iceland's parliament and replacing it with a direct democracy, where all citizens can vote on legislation
- Decriminalizing or maybe even legalizing drugs (it's hard to tell from their platform)
- A universal basic income
True to its direct democracy principles, the party has no actual leader. While there are other Pirate Party branches elsewhere in Europe, only Iceland's is so popular.
The "rise of the Icelandic Pirate Party has no direct parallel in any other Western country," Vidar Thorsteinsson, a PhD student at Ohio State, writes in Jacobin.
It's not clear if Iceland's government will call for parliamentary elections, or if it hopes that Gunnlaugsson's resignation will put an end to the crisis. But it's possible that the Panama Papers could, ironically enough, help empower an Icelandic party that supports, among other things, radical transparency of exactly the sort that led to the leak in the first place.
<@pyna> theres dozens
< pgp> the only thing gadaffi is good for is testing regular expressions
< pgp> M[ou]'?am+[ae]r .*([AEae]l[- ])? [GKQ]h?[aeu]+([dtz][dhz]?)+af[iy]
<Phantom_Hoover> It wasn't in deep space.
<Phantom_Hoover> It was orbiting Bajor.
The Circle of Life!
<kmc> it came in a cardboard box
<kmc> i took the can out of the box, broke down the box, and put it in the can
<kmc> it was amazing
this remains the least funniest thing anyone has ever posted on the internet and I want to repost it here so we can reflect on how low humanity can go
it is so unfunny that every time I look at it it actually steals future laughs from things I will later find funny
You are terrible people (watch to the end).
As untrue as this is... it's painfully true.
Anatomy of Songs [wronghands]
marathemara: iizanimeaddict: My dad just came into my room and shouted at me in Klingon. Am I more...
(I am a lab assistant in our computer lab. I am telling another assistant that the majority of student questions can be answered with just ‘Yo,’ ‘Oh,’ ‘So,’ and ‘No.’ My friend laughs and is just about to tell me I am full of it when a student walks up to me:)
Student: ”Excuse me.”
Student: ”I’m working on this program for the intro class.”
Student: ”I have the program ask for a number from the user.”
Student: ”Can the person type the word for a number instead of the numbers?”
Student: ”Okay, thanks.”
(I smiled at my friend who was laughing and speechless.)
(Company policy requires us to lock our computers when we walk away from them. Thanks to our office prankster, if someone leaves a computer unlocked, we have a running joke of sending an email from their computer to the rest of the IT staff along the lines of, ‘I seem to have lost my pants.’ One morning, we receive such a message from the prankster’s computer.)
Prankster’s Computer: “Has anybody seen my pants? I had them on this morning, but now I can’t find them anywhere. If you find them, please let me know where they are!”
Coworker #1: “Have you checked in the fridge?”
Coworker #2: “You should really be more careful with your pants. I think they were in the training room.”
Me: “I saw some guys walking by wearing pants earlier. Maybe they took them?”
(Everyone gets a chuckle, and we get on with our work. Half an hour later, the employee in question walks out of his cube wearing only his shirt, socks, and boxers.)
Prankster: “Seriously, has anyone seen them? Anyone?”
(It’s a good thing we have such a laid-back boss, and no female coworkers…)
It’s true. I have recently (yesterday!) purchased a motor vehicle. It was a pleasant and invigorating experience, and my car is very beautiful and full of confusing technology and excessive purse storage. I have named him Dracarys, and he will serve me well. Having accomplished this task in less than 48 hours with only a brief flurry of emails, one telephone call outsourced to A Man, and a ten-minute in-person visit merely to sign pre-arranged paperwork and receive a bucket of swag and two sets of keys, I now wish to share with you the lessons I have learned along the way. They’re applicable to those of you who might want to purchase a new or certified pre-owned vehicle, I will not pretend to know anything about the niceties of used-car-haggling. I hear Roxane Gay’s dad is who you should bring along for that. Otherwise, this is what you should do.
Figure out exactly what car you want to buy. Do this online. Do not walk into a dealership. The internet is literally stuffed with rankings and reviews and Best Mid-Price Blue Sedans lists. “Shouldn’t I test drive some cars?” No. Can you drive a car? You’re set. After you’ve been driving it for a week, you won’t be able to imagine driving a different car anyway. Why spend a couple hours of your life trying random cars like you’ve flown into Phoenix for business and are trying to figure out where the parking brake is on your rental? It’s a new or certified pre-owned car. They drive. They go vrroooom. I am glad you have picked a car.
Discover who sells this car in your area. Let us now move to my beautiful, personal story of triumph. I decided on a particular car, as per Step One, let’s call it a Dragon. There are two Dragon dealerships in Salt Lake City. I went to the dealership websites.
Let’s get one thing straight: I do not talk on the phone.
You don’t have to! You never have to talk on the phone if you don’t want to. That is because you can…
Contact the internet sales department! There will either be an email address for this, or a generic “Make an Inquiry” box, into which you type “please email me, I would like to buy a car.” Then you wait. You will probably wait about four minutes, because car dealers are like travel agents were fifteen years ago: hungry, and aware the end of their industry is upon them. Okay, you have received an email from a person. Ideally, you have received emails from a minimum of two dealerships. If there is only one in your town, email one in the NEXT town. You need two to tango, trust me.
Say “Hi! I’ll be doing this over email. I would like to purchase a 2014 Model X with the extra-fire package. What is your best price on that?” At this point, I received a very rapid response from each of my two dealers. Dealer One said: “That model is retailing for Money, I can offer you a discount which will bring it down to Money – $1000.” Dealer Two said: “I would have to order that in for you special, so it would probably cost Money.” NOW THE DANCE BEGINS.
SIDEBAR: In lieu of offering you a PRICE, you may hear “I can offer you 0.9% financing over 60 months!” Pay no attention to these words. You want the best price, not to be distracted with what your monthly payments will be. And, if you are actually planning on paying cash, do not tell them until the very, very end, because they make a lot of money off financing, and you will probably not get as good a deal if they know upfront they will not be making said money. Speaking of not mentioning things, if you have a trade-in, keep it to your damn self until I tell you it’s safe to mention it.
Email Dealer Two (or whoever made you the inferior offer) and say: “Oh! I’m talking to Dealer One, and they have one on the lot they’re willing to offer me for Money-$1000.”
SIDEBAR: The beauty of this system is you need speak only truth! You are merely a CONDUIT for the truth to be passed back and forth between two dealerships. You are not the enemy, the other dealer is. It is they with whom they do battle. You will drink the blood of the fallen.
Now, in my case, Dealer Two responded instantly to that message to announce that HE HAD FOUND a 2014 Model X with the extra-fire package, right there on the lot, like magic! Isn’t that incredible? And I could have it for Money – $1200!
Email the Dealer Formerly Known As The Best Deal and say “I’m talking to Dealer Two, and he can do Money – $1200.” Wait. Dealer One can now do Money – $1400! You’re no fool. You know we’re going to email Dealer Two and tell him that Dealer One has countered with Money – $1400. Wait.
This is a great time to take yourself over to truecar.com, plug in the model and year and package info, and see: 1) the MSRP (what you would pay for this car if you just showed up like a yokel and handed them your money no questions asked) 2) the invoice price (probably what the dealer paid for the car and will basically never go below – I mean, it can happen, but I’m not a WIZARD) and 3) what other people in your area have wound up paying for this car. It will also say things like “a good price for this car is below X,” “a great price for this car is below Y,” and “a YA GOT SERVED price for this car is F for FOOL.” Then you know these things, it’s nice. Back to the dance.
Obviously, this elaborate gamesmanship could go on forever. It will not, though, because one of two things will happen!
Scenario One: Eventually, one dealer will just give up. You have taken him to the ragged edge of invoice pricing, and he can go no further. In this scenario, you will buy from his competitor. We’ll come back to this part. But you have won!
Scenario Two: Both dealers will have gone through the basically inevitable step of saying “I have to go talk to my GM to see if I can go any lower on this car.” (Spoiler alert: when the alternative is losing the sale to another dealer, the GM will tell them they can go lower on this car.) At which point, they will say to you “I am authorized to do whatever it takes to beat the other dealer.” This is great! This is not helpful, however, to your dance. You want numbers. Again, you will speak only truth: “Hahahaha,” you type, “that is exactly what Dealer One is saying to me! What is your absolute bottom dollar on this car?” They may not tell you. They may simply repeat that they will beat the other guy. What do you do now?
Those numbers you ran earlier on truecar.com? Now you’re going to use them. You are probably in “great price” territory already, having brought these two dealers to their knees. Whatever increments prices have been dropping by ($200, $400, etc), double up, and make sure that the amount you are about to offer is ASPIRATIONAL and BOLD. Email your favourite of the two dealers. Trust me: you will have a favourite by now. Mine was Dealer One. Email him and say “Okay, I’d really like to buy this car from you. If you can give me this car at Most Recent Best Offer – 2x The Usual Drop We’ve Been Doing As We Go Back and Forth, I will not email Dealer Two and ask him to beat it.” He will probably say you have a deal. If he does not, you’re not an idiot, take it to Dealer Two.
NOW, if he says yes, you could theoretically still email that number to Dealer Two, like a jerk. It’s probably fine. I couldn’t do it! I gave that nice man my word, and we barely scraped above invoice, and I was very happy.
The important thing is, one of these two dealers is going to give you the absolute lowest price you can get away with paying for this car. You have won.
Optional Step Ten:
Do you have a trade-in? THIS IS WHEN YOU MENTION IT. Trade that lil fucker in. In our case, we had already unloaded our 1999 Chevy Tracker for a thousand bucks to a nice young couple and wished them luck.
DISASTER STRIKES. Because you cannot talk on the phone, but want to pre-do most of the paperwork (again, you want no surprises when you walk into the dealership to sign), you pass this phase off to your husband, A Man. (Gay women would never be so silly, I do not include them in this disaster scenario.) While your husband is on the phone, he remembers that you need a roof rack. Because he is not engaged in THE DANCE, he finishes the call, walks into the room where you are working on your misandrist blog, and says “we’re good to go! Oh, I had forgotten we needed a roof rack.” It transpires that he has paid MSRP for the roof rack, and thus eaten into some of your hard-won gains. You will hold this against him for at least a day, probably less if your misandrist blog money is not paying for the majority of said car. But it’s the PRINCIPLE.
Go pick up your car (do not buy an extra warranty, do not buy magical sealing paint, do not buy anything extra.) It is yours now. Finance, pay cash, who cares. You have forced men to the breaking point and beyond. You are a feminist hero. Play Liz Phair very loudly on the trip home.
Special thanks to John Adams of Jody Wilkinson Acura of Salt Lake City, who was a really nice guy. Additional thanks to Twitter user Pete Gaines, who spent many years in the car business and told me I didn’t have to talk to someone if I didn’t want to.
Copy this into your blog, website, etc.
...or into a forum
Cyanide & Happiness @ [URL="http://explosm.net/"]Explosm.net[/URL]
never give up on your dreams