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DE RUEHRK #0011/01 0291644
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P 291644Z JAN 08
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 3546
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 REYKJAVIK 000011 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV IC
SUBJECT:  ICELAND: REYKJAVIK CITY COUNCIL PLAYS TWO ROUNDS OF 
MUSICAL CHAIRS 
 
Ref:  07 Reykjavik 114 
 
¶1.  (U) Summary:  The majority coalition in the Reykjavik City 
Council has broken down twice in the past three months, resulting in 
three different mayors for the largest city in Iceland. The 
coalition majority of the Independence Party (IP) and the 
Progressive Party (PP) split up in October over a controversial 
public-private merger of two energy investment companies. The PP's 
lone councilman formed a shaky coalition with the minority parties. 
This coalition terminated in January when the one of the minority 
parties had a change of heart and left the coalition to join forces 
with the IP. Reykjavik voters are outraged at the turmoil and the 
rapid changes have hurt the credibility of the city council.  The 
newest mayor is pulling out all the stops to restore confidence. 
While some predict that the unrest at City Hall will cause strains 
in the national IP-Social Democrat governing coalition, no such 
faults are evident so far.  The tumult has, however, made it less 
clear whether the Reykjavik mayorship will retain its traditional 
role as a stepping stone to national office.  End Summary. 
 
First Ever Majority Coalition Split 
----------------------------------- 
¶2.  (U) On October 11, 2007 the majority coalition of the 
Independence Party and the Progressive Party in the Reykjavik City 
Council suddenly collapsed. The coalition had a one seat majority 
and Bjorn Ingi Hrafnsson, the sole PP city councilor, split off to 
form a new majority with the opposition parties that have seats in 
the city council: the Social Democratic Alliance (SDA), the Left 
Green Movement (LG), and the Liberal Party-Independents (LP). This 
was the first time in the history of Reykjavik that the coalition 
majority split mid-term. The cause was reportedly a disagreement 
between the IP and the PP over a public-private energy investment 
merger gone awry.  In early October 2007, Reykjavik Energy Invest, 
the business development and investment arm of Reykjavik Energy 
(Note:  Reykjavik Energy is a publicly-owned geothermal energy 
company, whose largest shareholder is the City of Reykjavik. End 
Note.), and Geysir Green Energy, a private investment firm targeting 
the geothermal energy sector, announced their agreement to merge. 
The IP was quickly mired in an internal party feud over the merger 
and the role of Mayor Vilhjalmur Vilhjalmsson, and as the negative 
media attention increased, Progressive rep Hrafnsson broke ranks 
with the coalition in a clear attempt to leave a sinking ship. 
 
¶3.  (U) The new majority consisted of the SDA, the LG, the PP, and 
the LP, and Dagur Eggertsson (SDA) became mayor. Olafur Magnusson, 
the sole LP city councilor, was considered the architect of the new 
majority. He was on sick leave while being treated for depression 
during most of 2007, and his alternate, Margret Sverrisdottir, 
filled his seat in the meantime. Both Magnusson and Sverrisdottir 
had left the Liberal Party in early 2007 due to disagreements with 
the party leadership and joined a brand new political party called 
the Iceland Movement (reftel); both remained on the city council 
under the Liberal Party-Independent label. Public opinion was 
divided on Progressive rep Hrafnsson's role in breaking up the IP-PP 
majority coalition, but the IP city councilors, including former 
Mayor Vilhjalmsson, were seen as bigger losers in the public-private 
merger drama. 
 
Majority Coalition Terminated...Again 
------------------------------------- 
¶4.  (U) In a surprise move on January 21, City Councilor Magnusson 
(LP) and former Mayor Vilhjalmsson (IP) announced they had reached 
an agreement on forming a new majority coalition. Magnusson will be 
mayor for the first half of the remaining electoral term and 
Vilhjalmsson for the second half (Note: The current electoral term 
ends in May 2010. End Note.). The decision caught everyone off 
guard, including Magnusson's alternate, Sverrisdottir, who stated 
that she would not support the new majority because Magnusson kept 
her out of the loop.  Pundits have been quick to note that her 
ambivalence hobbles the coalition, because if Mayor Magnusson is 
ever absent from city council meetings, Sverrisdottir can vote with 
the minority. 
 
¶5.  (U) The outgoing coalition wasted no time in voicing their 
complaints about the reshuffle, accusing the IP and Magnusson of 
undermining city government and voters' trust in their elected 
officials purely for selfish reasons.  Outraged supporters of the 
outgoing majority disrupted the City Council meeting on January 24, 
forcing a delay of several hours in Magnusson's election as mayor. 
 
¶6.  (SBU) Meanwhile, on January 23, Hrafnsson (PP), who had split 
the coalition in October, announced his immediate resignation from 
the Reykjavik City Council. In the days preceding the decision a 
former PP member of parliament accused Hrafnsson of trying to rise 
in the ranks of the party at the expense of others, and for 
purportedly using party funds to buy expensive clothes for use in 
the election campaign for the 2006 local elections. (Comment:  Once 
Hrafnsson was no longer keeping his party in the majority in city 
government, it seems the party leadership made it clear that the 
clothing allegations were the proverbial straw that broke the 
 
REYKJAVIK 00000011  002 OF 002 
 
 
camel's back.  His exit has for now quashed hopes of his potential 
as a future leader of the PP.) 
 
Snapshot of the New Mayor: Olafur F. Magnusson 
--------------------------------------------- - 
¶7. (U) Olafur F. Magnusson is a veteran at Reykjavik city politics. 
Before he was elected to the City Council in the 2002 local 
elections for the LP, he served as an alternate City Councilor for 
the IP from 1990-1998 and as City Councilor for the same party from 
1998-2001. Magnusson worked as a medical doctor in the 1970s and 
1980s and was active in the grassroots politics of the IP. Magnusson 
parted ways with the IP in 2001 because his environmental policy 
views were at odds with the policy of the IP. Subsequently he joined 
the Liberals and was elected to the Reykjavik City Council for the 
party in 2002 and 2006. Magnusson now considers himself an 
independent in the city council, but he is a registered member of 
the Iceland Movement. 
 
Comment 
------- 
¶8.  (SBU) Comment:  Despite media speculation, the changes at City 
Hall do not seem to have raised tension between the national 
government's IP-SDA coalition.  Prime Minister Haarde (IP) and 
Foreign Minister (and former Reykjavik Mayor) Gisladottir (SDA) have 
been careful in their public comments, though Gisladottir did allow 
that the way the new majority came about was "an unfortunate step" 
for both the people of Reykjavik and Icelandic politics in general. 
More broadly, these two swift changes in coalition majorities may 
herald a new era in Icelandic politics. This era may see 
power-hungry politicians who are not afraid of splitting alliances 
in exchange for greater professional glory. Additionally, neither 
Magnusson nor his coalition partner Vilhjalmson of the IP claim 
ambitions to national political office, which when added with a loss 
of voter confidence could mean that fewer look at the Reykjavik 
mayorship as a traditional stepping stone to higher office. 
 
¶9.  (SBU) Comment, cont'd:  Olafur Magnusson (LP) and the IP city 
councilors can for the moment be called the winners of the course of 
events on January 21. However, the creation of the new majority 
comes at the cost of voter confidence. A January 24 poll shows the 
new majority enjoys the support of only one quarter of the 
electorate, and just six percent support the new mayor. Many have 
asked if Magnusson is capable of handling the mayoral position given 
his medical problems in 2007, a line of questioning not usually seen 
in Icelandic politics.  Magnusson has gone on the offensive to 
answer the questions, hitting all major media outlets over his first 
weekend as mayor and asking to be judged "by my work, not by my 
illness."  However, with such a tenuous majority, the life of the 
new coalition could easily be cut short. End Comment. 
 
VAN VOORST