Iceland swears in shaky new government after Panama Papers

Sigurdur Ingi Johannsson speaks to reporters at Iceland's parliament in Reykjavik, April 6, 2016.
Sigurdur Ingi Johannsson speaks to reporters at Iceland's parliament in Reykjavik, April 6, 2016.PHOTO: EPA

REYKJAVIK (AFP) - Iceland's new right-wing government took office on Thursday, under fire from the start as the opposition sought a vote of no confidence and stuck to its call for swift elections.

New prime minister Sigurdur Ingi Johannsson replaces Sigmundur David Gunnlaugsson, who quit on Tuesday amid mass protests over a hidden offshore account revealed in the "Panama Papers" leak of millions of financial records.

Johannsson, a 53-year-old former veterinarian, has already announced new legislative elections will be held in "the autumn", about six months ahead of the scheduled April 2017 vote.

But protesters have demonstrated outside parliament for three days in succession, throwing eggs and yoghurt at the building.

They have called for the ouster of the coalition comprising Johannsson's centre-right Progressive Party and their junior partners, the Independence Party, and demanded elections be held sooner.

Johannsson was sworn in by President Olafur Ragnar Grimsson at the presidential residence in Reykjavik.

Earlier, as Gunnlaugsson handed in his resignation to the president, he was met by angry protesters who brandished red cards at him and chanting: "Elections immediately, we want to vote!"

Birgitta Jonsdottir, founder of the libertarian Pirate Party that has surged in the polls in the current crisis, has said people want more than a cabinet reshuffle.

Formed in 2012 and campaigning for more transparency in politics, Internet freedoms and copyright reform, the Pirate Party is now credited with a whopping 43 per cent of voter support.

Their support stems from massive frustration over the political establishment's implication in two major financial scandals: the country's 2008 banking crash, and now the Panama Papers leaks.

Icelanders generally have little else to complain about: the country boasts full employment, low crime levels, a well-functioning welfare state, low income inequality, and a high life expectancy of 83 years.

But the new prime minister, who held the important fisheries and agriculture portfolio in Gunnlaugsson's government, is hardly popular.

A poll at the end of March suggested that just 3 per cent of voters had a favourable opinion of him.

He is seen by critics as emblematic of the old guard that turned a blind eye to bankers' reckless investments that brought down the banking sector in 2008.

The financial meltdown plunged Iceland into a deep recession and left thousands mired in debt.

The leftwing and centrist opposition parties have presented a motion of no confidence to parliament, which is expected to be voted on Friday - though it has no chance of being adopted because of the government's majority.

Gunnlaugsson became the first major political casualty to emerge from the Panama Papers, resigning over revelations that he and his wife owned an offshore company in the British Virgin Islands and had placed millions of dollars of her inheritance there.

The prime minister sold his 50 per cent share of the company to his wife for a symbolic sum of US$1 at the end of 2009, but he had neglected to declare the stake as required when he was elected to parliament six months earlier.

Gunnlaugsson has said he regretted not having done so, but insisted he and his wife had followed Icelandic law and paid all their taxes in Iceland.

Two other Iceland Cabinet ministers, including Finance Minister Bjarni Benediktsson, have been singled out in the Panama Papers.

Benediktsson has denied any tax evasion. He said he built an offshore company to launch a real estate project in Dubai that never materialised, and the company has no business.

A poll published on Wednesday showed that 69 per cent of Icelanders wanted Benediktsson out, even though he enjoys the full support of the Independence Party he heads.

The government coalition does not want to hold a new election quickly given the uproar over the Panama Papers scandal, as it would surely suffer from a resounding protest vote.