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Panama Papers leak claims first political scalp in Icelandic PM

Published 06/04/2016

Sigmundur David Gunnlaugsson is the first major political figure to step down amid the Panama Papers furore (AP)
Sigmundur David Gunnlaugsson is the first major political figure to step down amid the Panama Papers furore (AP)

Iceland's embattled prime minister has resigned after facing accusations of a conflict of interest due to offshore accounts.

Sigmundur David Gunnlaugsson has become be the first major figure brought down by a leak of more than 11 million financial documents from a Panamanian law firm showing the tax-avoidance arrangements of the rich and famous around the world.

Mr Gunnlaugsson has suggested that Sigurdur Ingi Johannsson, his Progressive Party's vice-chairman, should take over as prime minister for "an unspecified amount of time".

Iceland's president Olafur Ragnar Grimsson has not yet confirmed any changes to the leadership and the situation remained muddled as hundreds of protesters gathered outside parliament to demand Mr Gunnlaugsson's removal.

There were contradictions throughout the afternoon and evening as officials first said Mr Gunnlaugsson had resigned as prime minister, statements that were later contradicted by a statement from his press secretary which indicated he was only stepping down for a period of time.

The statement also suggested that Mr Gunnlaugsson would remain as party chairman.

It is not clear if new elections would be held or if the governing coalition will be able to weather the crisis that developed several days ago with the release of the Panama Papers.

The lack of a clear resolution angered some protesters who blew whistles and banged on pots and pans in front of parliament.

"I'm here because the government still hasn't resigned," said store manager Elfar Petursson.

"The finance minister and the interior minister are still sitting in parliament, they refuse to resign, they both have offshore accounts."

Revelations in the Panama Papers about offshore accounts held by Mr Gunnlaugsson and his wife have infuriated many residents who suffered during the financial collapse of 2008 and 2009.

Mr Gunnlaugsson has denied wrongdoing, saying he has paid taxes and did nothing illegal regarding his offshore holdings.

Opposition politicians say the holdings amount to a major conflict of interest with his job.

Mr Gunnlaugsson said his financial holdings did not affect his negotiations with Iceland's creditors during the country's acute financial crisis, although those assertions did little to quell the controversy.

The prime minister sought at first to dissolve parliament and call an early election, but president Olafur Ragnar Grimsson said he wanted to consult with other party leaders before agreeing to end the coalition government between Mr Gunnlaugsson's centre-right Progressive Party and the Independence Party.

Mr Grimsson said: "I need to determine if there is support for dissolving (parliament) within the ruling coalition and others. The prime minister could not confirm this for me, and therefore I am not prepared at this time to dissolve parliament."

The president met with Independence Party members to discuss the governmental crisis. Gudlaugur Thor Thordarson, chairman of the Independence Party, criticised the prime minister for unilaterally seeking to dissolve parliament.

He said: "It was a total surprise for us to see that. I don't think it was the rational thing to do. I've never seen it done before in Icelandic politics and I hope that I will not see it again."

The impact in Iceland from the leaks has been the most dramatic, but leading officials in Russia, Ukraine, China, Argentina and other countries are also facing questions about possibly dubious offshore schemes used by the global elite.

The leaked documents allege that Mr Gunnlaugsson and his wife set up a company called Wintris in the British Virgin Islands with the help of Mossack Fonseca, the Panamanian law firm at the centre of the story. Mr Gunnlaugsson is accused of a conflict of interest for failing to disclose his involvement in the company, which held interests in failed Icelandic banks that his government was responsible for overseeing.

Arni Pall Arnason, leader of the opposition Social Democratic Alliance, said Mr Gunnlaugsson's position was not tenable.

"I think it's obvious that we cannot tolerate a leadership that is linked to offshore holdings," he said. "Iceland cannot be the only western European democratic country with a political leadership in that position."

Iceland, a volcanic island nation with a population of 330,000, was rocked by a prolonged financial crisis when its main commercial banks collapsed within a week of one another in 2008.

Since then, Icelanders have weathered a recession and been subjected to tough capital controls - another reason the prime minister's offshore holdings rankle many people.

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