Iceland: ‘Choosing between doing what’s necessary and being popular’

Despite having performed a small economic miracle, the left parties in Iceland lost heavily in the elections that took place at the end of April. In the view of the former Finance Minister Steingrimur Sigfusson, “We have responsible policies and fought a responsible campaign.’

Things were turned upside-down in 2009. Iceland, the country where the crisis had hit so hard, after years of neoliberal politics elected a parliament and government of the left. Huge demonstrations had sent the right-wing government packing, holding them responsible for the enormous financial crisis. The SP’s sister party, the Left-Green Movement, entered into a coalition government with the social democrats and Steingrimur Sigfusson, party leader at the time, was appointed Minister of Finance, opting for socially positive means to resolve the crisis.

He was interviewed in July, 2013, by Dutch Socialist Party   monthly De Tribune.

International comment was exceptionally approving of the way in which the left government dragged Iceland out of the extreme crisis. What are you yourself most proud of?

I think that our biggest successes lie in the economic and social field. We reduced the budget deficit from 10-14% in 2008-2009 to 0-1% this year. We restored economic growth to 2-2.5% for three years in succession. We brought unemployment down from around 9% to below 5%, and inflation from 18% to 4%. Iceland has recovered from the crisis.

And in the social field?

That isn’t a separate issue. We managed to effect this restoration of the economy without demolishing Iceland’s welfare state. We designed the measures we took with the aim of protecting those on low incomes and supporting the welfare state. We did this, for example, by increasing taxes on the highest incomes and by not including a range of benefits in the spending cuts. In my view that’s what you have to do in any case if you want to conduct socially positive and just policies, but it also turns out that it’s effective economically.

In Europe and in the Netherlands spending cuts are the order of the day. If there is one country that had no space for economic stimulation it was Iceland. How did you do it?

As Finance Minister I rapidly determined, as did the rest of the government, that Iceland’s enormous problems, which included the huge deficit, could only be resolved by doing two things at the same time. Revenues had to be increased and expenditure reduced.  We called this the mixed approach. The mix was about 50% revenue increase and 50% expenditure reduction.  We had no money for rapid stimulation packages, so we opted for extremely targeted measures and the activation of innovation and development. And, extremely importantly, we also looked at support to households on low incomes, not only as a social measure, but also as a way of stimulating the economy.

The Left-Green Movement was in coalition with the social democrats. Did that work out?

All in all it was a successful and fruitful cooperation. On social issues and in environmental matters our parties aren’t so far apart. Because our part had the Finance Minister’s post, we could exercise a great deal of influence on taxation and on economic policy. Cooperation between our parties was strengthened by the good relationship between our party leaders and indeed between myself and the Prime Minister Jóhanna Sigurðardóttir. What also helped was that both parties had similar levels of support. We had just the same number of ministers. The difference in voting levels wasn’t so very big: we had 22% and the social democrats had 29%. And beyond that both parties were extremely conscious of the historic task confronting us, to rescue Iceland from the crisis and complete the period in government with success as Iceland’s first purely left government.

According to some analysts, the loss of vote share can be explained by the fact that the government adopted a pro-European line. Do you agree?

As a government we took steps to make joining the European Union possible. Within our party that was indeed a difficult decision, but I don’t think that it played an important role in the election.  The Left-Green Movement is against membership of the EU and that hasn’t changed. At the same time we believe that the decision must be taken on the right grounds. It’s a very big question for Iceland and that’s why we’ve said that such a big question can only be answered by the people themselves.  So we agreed to the start of negotiations, but with the aim of course of putting the results of these negotiations to the Icelanders in a national referendum.

How do you explain the election result?

 We went into the election with the message ‘responsibility, social as well as economic’. We profiled ourselves as the party of sustainable development and of the environment. We asked the electorate to let us continue on our present course. They didn’t do that. We lost a lot of votes: from 22% in 2009 to 11% now. You have to remember that we’d had two elections in succession when we’d made big gains. In 2007 we went from 9% to 14% and in 2009 from 14% to 22%. So looked at historically this 11% isn’t totally bad. We now have 7 of the 63 seats in parliament. The analysis is that in recent years we’ve had to take difficult decisions in order to pull Iceland out of the crisis. And although we did our very best to get the community here through it as smoothly as was possible, things were nevertheless not easy for the ordinary Icelander. And against our message of responsibility stood a whole series of irresponsible election promises from the opposition parties. They promised everyone a reduction of debt, lowering of taxes, and even more. You could say that we lost the fight to a large extent because during the election campaign we took an extremely responsible position.

Is it possible to win elections when you have such huge problems to solve?

That’s the big question. An important question. I wrote a piece about it in the Financial Times in which I evoked the question as to whether as a politician in these times you can still please the electorate.  One’s so used to the prosperity that was brought about by a bubble-based economy, that people too easily forget what led to these bubbles and thus to the crisis. There’s little understanding of the fact that if you want to avoid going from crisis to crisis, economic growth must be sustainable. This paves the way for opportunistic promises from parties that everyone will be better off if they simply decide who to vote for on the basis of short-term desires. Not only politicians, but also voters need to think this through. Then what you see is that as a left government you don’t succeed in fighting against irresponsible opposition parties helped by the right-leaning media. But we ourselves also let things lie too long. We were so overburdened with work that we didn’t take much time out to conduct the necessary social dialogue.’

What lessons have you learnt from the last few years?

The big lesson is that you sometimes have to choose between doing what’s necessary for your country and being popular. Or, to put it another way, a finance minister from a country on the brink of bankruptcy who thinks constantly about popularity isn’t the right person for the job. We, the Left-Greens, are proud of what we have meant for Iceland and are convinced in this regard that it was a good thing for the average Icelander, and especially for low income groups, that a socially-inclined government led the country out of crisis. So we have absolutely no regrets about our decision to go into the government. We are convinced that in the future people will look at this and say that we did well in difficult, unique circumstances.

And what it has meant for your party?

I can certainly say that this period has been extremely tough; it’s cost a great deal of energy. And to a great extent our party has suffered under this; after all the leaders of our party were under huge pressure as government ministers. But still, we have now a lot more experience, we’re tougher and wiser. And it’s been confirmed for all time that our party can govern. We’re a responsible party which doesn’t run away when duty calls.

Text translated from the original Dutch text by Spectrezine editor Steve McGiffen