Pirate Party Eyes Parliament After Iceland PM Sigmundur Gunnlaugsson Resigns Over Protests

UPDATE 8:00 a.m. EDT -- After news broke Tuesday that Icelandic Prime Minister Sigmundur David Gunnlaugsson had resigned from office, Gunnlaugsson denied he had stepped down later that evening, saying he had temporarily stepped aside, the Financial Times reported Wednesday. Gunnlaugsson and his wife were implicated in the so-called "Panama Papers" leaks, which revealed the couple had owned an offshore company that may have served as a creditor to Iceland's faulty banks during the 2008 economic crisis.

Original Story:

The demonstration was mostly peaceful — one person threw a yogurt at the Parliament building and was arrested — as nearly 20,000 people crowded Monday into Austurvöllur Square in Reykjavik, Iceland. Police hadn’t seen such large groups of demonstrators on the streets since the country’s economic collapse in 2008 drove thousands into the same square, one officer told Viktor Stefansson, a protester and political activist who stood in the front lines.

“It was the last straw. There had been mounting pressure on the prime minister for some time,” said Stefansson, 24, the vice chairman of Social Democratic Youth in Reykjavik, the youth wing of the center-left party of the same name. “So when this news leaked, people were very angry,” he said.

Prime Minister Sigmundur David Gunnlaugsson's apparent offer to resign Tuesday, amid revelations that he owned an offshore company, could result in a renegade political party fueled by voter outrage taking power in a potential snap election. While the Pirate Party is best known for its lax drug policies and internet freedom crusades, its members have also proposed enacting a 35-hour work week and splitting the investment and commercial units of banks. With poll numbers putting their support higher than the ruling coalition parties combined, the election of this anti-establishment party could spell uncertainty for the European country's economic stability and political future.

The leaked documents from Panama legal firm Mossack Fonseca revealed this week that Gunnlaugsson had once owned an offshore company — now controlled by his wife — that was a creditor of Icelandic banks that collapsed during the country’s 2008 recession. The details of when Gunnlaugsson owned shares in the company and how involved he was in its dealings have not yet been revealed, but citizens and members of government alike were quick to call for the prime minister’s resignation, arguing that any involvement he had in the company would have been a conflict of interest.

Gunnlaugsson and his Progressive Party, which is center-right despite its name, rose to power in 2013, as the island nation of 320,000 people continued to feel the fallout of the economic recession. In the early 2000s, the top three Icelandic banks grew rapidly by offering high-interest rates to foreign investors. A series of unwise asset purchases, coupled with a worldwide economic downturn, led to the collapse of all three. Like many European nations, including Portugal, Italy, Greece and Spain, the Icelandic government accepted loans from European lenders in exchange for unpopular austerity measures such as budget cuts and higher taxes.

After accepting $2.1 billion from the International Monetary Fund and an additional $2.5 billion from neighboring Scandinavian countries, Iceland increased interest rates sharply and slashed spending, repaying its loans in 2015. As the economy has recovered, becoming larger than it was before the recession, many average citizens have pointed out that the increased GDP had not translated to higher wages. Gunnlaugsson’s party campaigned on a direct democracy platform, promising to hold a referendum on joining the European Union and to reform the constitution to prevent future banking crises from happening. Neither promise was fulfilled.

Enter the Pirate Party. So strongly anti-establishment that they refuse to have a leader, the party was founded by former Wikileaks spokeswoman Birgitta Jonsdottir and fellow internet activists. Campaigning for internet freedom and lax drug laws — and sometimes even wearing black pirate hats — the party won three seats in April 2013, Iceland’s last general elections.

“I don't think there's any one explanation for our popularity,” Jonsdottir told Bloomberg in January, adding, “People are obviously tired of being promised the world ahead of elections, only to see political parties negotiate among themselves and back away from their promises.”

The Pirate Party is just one of more than a dozen anti-austerity or anti-establishment parties throughout Europe that have seen increased popularity in the wake of belt-tightening measures instituted after the 2008 economic crisis. Podemos in Spain, Syriza in Greece and Sinn Fein in Ireland – to name a few – have performed well in elections in the past year, winning unprecedented support as citizens continue to complain of ongoing high taxes and unemployment. The election of these anti-establishment parties was followed by a marked, if slight, economic downturn, as the uncertainty of a new party in power scared foreign investors.

A Gallup poll released last week before news of the "Panama Papers" broke put support for the Pirate Party at 36.1 percent, up from 5.1 percent in 2013. Gunnlaugsson’s Progressive Party saw just 12.1 percent of support in the same poll, national broadcaster RÚV reported Thursday. If polls are correct, however, the young party is still far from a majority and would have to form a coalition with one or more of the left-wing parties.

The Pirate Party has a vague economic platform, and its policies could vary based on its coalition partner. If it partnered with Bright Futures Party or the Social Democrats, for instance, it would likely see its frequently anti-establishment politics transform into a more pro-European Union stance on economic policies.

The Pirate Party was at first a single-issue party contained within a broader movement focused on net neutrality, though it has expanded its platform to capitalize on growing discontent with the ruling parties. Several of the Pirate members of Parliament proposed a bill in October to reduce the work week from 40 hours to 35. Another member of the party suggested completely separating the commercial and investment branches of banks.

“The party was able to diversify itself,” said Benjamin Leruth, a sociological researcher at the University of Kent in Britain, who has followed the rise of the Pirate Party.

While the island's economy is small, with a GDP worth around $15 billion, its GDP per capita is higher than that of both Germany and France, Europe's two largest economies, and the uncertainty of a new and relatively untested party in government is a potential cause for concern.

“That’s a party that does not have any experience in government, so it’s difficult to discuss about the outcome of having a Party Pirate government” said Leruth. “There’s always a risk when you elect a new party.”