VZCZCXRO0653
PP RUEHIK
DE RUEHRK #0219/01 3421656
ZNR UUUUU ZZH
P 081656Z DEC 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 4236
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 REYKJAVIK 000219 
 
SENSITIVE 
 
NSC FOR HOVENIER 
TREASURY FOR NORTON 
 
SIPDIS 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EFIN IC
SUBJECT:  ICESAVE BILL LINGERS AS DIVISIVE FORCE IN GOVERNMENT AND 
SOCIETY 
 
REYKJAVIK 00000219  001.2 OF 002 
 
 
¶1. (U) Summary.  The coalition government recently reached a 
negotiated settlement with the opposition that allows the Icesave 
bill to move to the next stage of the parliamentary process.  The 
settlement was reached only after the opposition used filibustering 
techniques to stall the bill in the second reading for more than one 
month because they did not have the necessary votes to defeat the 
measure.  The compromise, which will send the bill back to the 
budget committee on December 8 for further discussion on 16 key 
points, allows parliament to move forward and focus on other 
pressing matters such as the budget bill and proposed tax hikes.  It 
does not, however, resolve the Icesave issue which continues to 
linger and generate animosity in Iceland.  Expectations are that the 
bill will not pass before year end. End summary. 
 
Parliamentary Discussions Turn Ugly 
------------------------------------ 
¶2. (U) The coalition government reached a settlement with the 
opposition on December 4 that moves the Icesave bill out of second 
reading and back to the budget committee for further discussion on 
16 key points. This ends more than one month of stalling by the 
opposition and is, technically, progress as it moves the bill closer 
to an eventual vote.  A parliamentary vote, however, is not imminent 
and discussions during second reading were so contentious that they 
opened wounds unlikely to heal quickly.  There were several tense 
exchanges between members of parliament that clearly exceeded the 
standard level of parliamentary decorum. 
 
¶3. (SBU) One notable exchange occurred when Birgitta Jonsdottir, an 
MP in The Movement, scolded the president of the parliament by 
yelling out "you are not my president" during the course of 
discussion.  The comment came after the president of the parliament, 
Asta Ragnheidur Johannesdottir, tried to regain order and ensure 
that parliamentary procedures were followed while Jonsdottir was 
speaking.  Such egregious behavior was not limited to the 
discussions among parliamentarians.  One member of parliament 
confided to Emboff that she regularly receives hate mail regarding 
the Icesave issue, including one email that she considered to be a 
thinly veiled death threat if she voted in favor of the bill. 
 
The Coalition's Perspective 
---------------------------- 
¶4. (SBU) In private discussions with Emboffs, several members of the 
coalition expressed frustration with the government's inability to 
resolve the Icesave issue.  The government has the necessary votes 
to pass the bill and some members of the coalition would like to see 
their side force a vote and put an end to the matter.  Leadership 
within the coalition, however, is wary of forcing the issue because 
it does not want to incur the wrath of the public.  If the coalition 
moves too quickly, before all options are exhausted, it may be 
viewed by the public as pandering to foreign entities and 
sacrificing the future of Iceland.  Some members of the coalition 
also believe that it is important to let the dialogue run its course 
so that the opposition can maintain its dignity and to keep open the 
possibility of future political cooperation.  They believe that the 
opposition's assistance may be necessary when parliament tackles 
other controversial matters that notably include the budget bill and 
proposed tax hikes. 
 
The Opposition's Perspective 
----------------------------- 
¶5. (SBU) The opposition, for its part, would like the Icesave 
agreement to fail and for the issue to be decided in a court of law. 
 It is, however, vague regarding the mechanics of exactly how this 
could occur.  Without a clear alternative to offer, the opposition 
seems content to let the issue linger as public resentment builds. 
This strategy may be paying dividends as a November 30 Gallup poll 
shows that the Independence Party is now the most popular party in 
the country with 32 percent of the nation's support.  The coalition 
partners, the Social Democrats and Left Greens, are second and third 
in the poll with 26 and 23 percent, respectively, of the nation's 
support.  Local elections next spring will give a better picture of 
how much national support each party actually  enjoys. One observer 
told Emboffs that, if matters continue along their current course, 
the Independence Party could do quite well in those elections. 
 
¶6. (U) The opposition points to an anti-Icesave petition that has 
garnered over 30,000 signatures in less than one week as proof that 
they have the public's support.  The petition calls on the President 
to refuse to sign the Icesave bill should it eventually pass 
parliament.  Were the president to refuse to sign the bill the issue 
would be put before the people in a national referendum.  (Note: In 
2004, President Grimsson refused to sign a contested bill on the 
mass media.  The bill did not go to a national referendum, however, 
as parliament withdrew the bill before that could happen.  This is 
the only time an Icelandic President has refused to sign a bill into 
law. End Note.)  Although it is unlikely the president would 
 
REYKJAVIK 00000219  002.2 OF 002 
 
 
actually take this drastic step, the opposition would like to delay 
passage of the bill to allow as many people as possible to sign this 
petition. 
 
Comment 
-------- 
¶7. (SBU) The Icesave bill is still moving forward and will likely 
pass eventually, as the coalition believes it has a majority of 
votes.  The bill's progression through the second stage of the 
parliamentary process, however, has not gone as smoothly as 
anticipated.  The process has exacerbated tensions between the 
governing coalition and the opposition that will likely hinder 
cooperation on future legislative issues, notably the budget bill 
and potential tax hikes.  The issue has also revealed fissures 
within the ranks of the coalition.  While the coalition is expected 
to remain in power for the foreseeable future, in seeking to reach 
consensus with the opposition rather than pushing the matter through 
Parliament, the coalition may very well have eroded its 
effectiveness.  Iceland, itself, will likely also remain incapable 
of moving forward so long as the Icesave matter lingers as a 
divisive force in society. 
WATSON