Category Archives: Iceland

(EurActiv) ‘No thanks!’ to EU and Nato, Iceland PM says


  • Katrin Jakobsdottir became Iceland’s first Green prime minister on 30 November 2017 (Photo: Seppo Samuli/

Eurozone failures mean Iceland should stay out of the EU, its prime minister told EUobserver.

She would also quit Nato if she had her say.

  • During the Second World War US troops kept Iceland free from German occupation (Photo: EUobserver)

“I don’t think we should enter the EU right now. I don’t think there is any reason to apply,” Katrin Jakobsdottir said in an interview with this website, as Iceland’s new government prepared to celebrate its first anniversary in power.

“Personally, I’m critical towards the economic policies of the EU – the creation of the eurozone without any real centralised policies on taxes or fiscal policies,” she said.

“The European Central Bank has become really powerful without being very democratic. The economic policies of the EU have been really distant from people in the eurozone and they’ve created divisions that need not be there,” she added.

Iceland applied to join the EU in 2009, but abandoned the process in 2015.

It has remained a member of the European Free Trade Association (EFTA) and the European Economic Area (EEA), two free-trade clubs, instead.

The North Atlantic country, with a tiny population of just 340,000 people, is also a member of Nato, the world’s largest military alliance.

The issue of EU membership remained divisive, Jakobsdottir said.

“It was controversial then [in 2009] and still is,” she said after recent polls, which indicated that 60 percent of Icelanders wanted to stay out of Europe, while 40 percent wanted to go in.

Free trade with the EU had been unequivocally good for Iceland, the eurosceptic prime minister said, however.

“Iceland’s position within the EEA has proved beneficial to us,” Jakobsdottir said.

“When we look at our economy, our social structure and our policy-making, I think that we’ve done pretty well without being members of the EU,” the prime minister said.

“You can check all the indices of the world: We’re not doing too badly on economic performance, social indicators, or gender equality for that matter, where we’re ahead of all other Nordic countries,” she added.

War games

The 42-year old Jakobsdottir, a former academic, became the second-ever woman to lead Iceland last year.

Her party, the Left-Green Movement, formed a coalition with the liberal Progressive and Independence parties to take power.

The government supports Nato membership, but the prime minister said she favoured “diplomatic and political” solutions to modern security challenges.

“My party’s position is that we are against Iceland’s membership of Nato. However, we’re the only party in Iceland’s parliament that holds that position,” she said.

“We – as the Left-Green party – recognise that there is a strong majority in Iceland in support of our Nato membership, but we don’t favour the idea of a permanent military presence here in Iceland,” she added.

US troops kept Iceland free from German occupation in World War II.

Iceland also became a founding member of Nato in 1949, but the US quit its permanent base there in 2006.

Jakobsdottir spoke amid mass-scale Nato war-games – Trident Juncture – which began last week and which saw three Canadian and two British frigates as well as a US amphibious assault ship, the USS Iwo Jima, and 7,000 American soldiers come to Reykjavik.

The operation’s focus is to defend Norway from a “fictitious aggressor” – Nato’s veiled term for Russia.

But the straits between Greenland, Iceland, and the UK have received increased attention after Russia seized Crimea from Ukraine in 2014 and began a military build-up in the Baltic and Arctic regions.

US P-8 Poseidon aircraft, which hunt for Russian submarines, have also become frequent visitors at Iceland’s Keflavik airport in recent years.

Diplomatic solutions

Jakobsdottir said she was “critical of any increased militarisation of the North Atlantic.”

Her government would “stick to the security policy [Nato membership] that we’ve agreed upon”, she said.

But “we [her party] favour more peaceful solutions and we don’t think that increased militarisation is a solution,” she added.

“We need to strengthen diplomatic and political relations. We will not give up that position even if there is trouble around us,” she said.

+++ M.P.O. (BBG) Iceland Won’t Peg Currency for the Foreseeable Future, PM Says


Enough Nonsense:

I thought the original idea of pegging the Iceland Krona with the Euro was at least ridiculous…

A Country with 330000 People, that after the crash of 2008, has had a remarkable success, with GDP growing 11% in the last quarter of 2016, with a currency that appreciated 20% in the last year, and a gigantic boom in tourism, cannot peg its currency, full stop.

To peg one country’s currency against another, one has to have a large enough economy, in absolute terms,that is growing in line with the one that has the currency you want to peg to.

It’s clearly not the case of Iceland that has a minuscule economy, in which everything makes a big difference for better or for worst.

Plus even if conditions were right to peg, that country would have an “atomic bomb of currencies”, meaning a huge,an enormous stock of foreign reserves to fend off any speculation.

Look at Denmark for example…

It has 61.7 billion USD in Foreign Exchange Reserves…

Enough to fend off any speculators…

They would hit a wall of cash…

And Denmark’s economy has no comparison with Iceland’s economy…

Iceland’s GDP is 16.6  Billion USD in 2014.

Denmark’s GDP was 346  Billion USD in 2014.

Source: FindTheData

Enough nonsense!

Case closed.

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) As they search for a permanent exchange-rate framework, Iceland’s policy makers are finding they may disagree on some pretty fundamental issues.

Power politics in the 340,000-people nation are being laid bare, as the nation’s prime minister, who heads the establishment Independence Party, and its finance minister, a former publishing executive who leads the newly created Reform Party, are pushing different messages on the currency regime that Iceland may adopt.

“It’s somewhat concerning that Finance Minister Johannesson hints at what should be Iceland’s monetary regime while the government has already appointed a group of three economists to give their proposal,” said Lars Christensen, founder and chief executive officer at Markets & Money Advisory. “Furthermore, there seems to be a direct conflict between what the finance minister is now saying and what we earlier have heard from the prime minister.”

Prime Minister Bjarni Benediktsson over the weekend pushed back on comments made by Finance Minister Benedikt Johannesson that the government is heading toward a currency peg, a flare-up that is being covered widely in the local press. To make the issue even more poignant, the two are also first cousins. The center-right government, commanding the thinnest majority possible, took more than two months to cobble together after snap elections last year.

The premier underscored the value of a freely floating currency in enabling Iceland’s economic rebound after its 2008 collapse and dismissed as flawed the notion that a fixed exchange-rate regime was the only path to future economic success.

Bjarni Benediktsson

Photographer: Arnaldur Haldorsson/Bloomberg

“There are no magic bullet solutions that reduce fluctuations and retain stability,” Benediktsson said in a phone interview from Reykjavik on Sunday. “Different solutions will present us with different challenges.”

After dismantling its capital controls in March, Iceland has set up a panel to find a framework for the island’s exchange rate and monetary policy. The goal is to settle on a model that promotes economic growth, while maintaining stable inflation and low unemployment. It’s expected to deliver its results later this year.

The panel is “carrying out that work on the premise that the krona will be our currency for the foreseeable future,” Benediktsson said.

The krona was little changed at 120.86 per euro as of 10:10 a.m. local time.

The Financial Times reported that Iceland was considering pegging the krona to either the euro or the pound, citing the finance minister. He told the newspaper that the “status quo” is “untenable.”

But Benediktsson underscored the value of having a free-floating exchange rate as a useful mechanism to help economies adjust, suggesting the finance minister’s comments don’t necessarily reflect the views of his boss.

“The krona’s role in the collapse and subsequent resurrection is undisputed,” the prime minister said. “The depreciation of the krona during the collapse led to our export industries being better equipped to lead the resurrection and made Iceland a more desirable tourist destination.”

The krona’s onshore rate weakened to almost 200 to the euro at the end of 2008. Three years earlier, Icelanders only needed to part with about 70 kronur to buy one euro. Though inflation surged, and index-linked household debt swelled, the massive devaluation also came with benefits. A trade deficit quickly turned into a surplus and, more recently, tourism has emerged as a major export success for Iceland.

The upshot has been a stunning economic recovery, with policy makers now wondering how to cool the pace of growth. In the fourth quarter of 2016, gross domestic product expanded more than 11 percent, on an annual basis. Wage growth has hit double digits and unemployment is below 3 percent.

Given the breathless pace of Iceland’s recovery, the government is keen that any monetary policy framework agreed on should promote “economic and financial stability,” Benediktsson said.

(GUA) Iceland’s Pirate party invited to form government

(GUA) Anti-establishment group receives mandate for power-sharing pact after talks to build five-party coalition fail.

Birgitta Jónsdóttir (left), leader of the Pirate party.
Birgitta Jónsdóttir (left), leader of the Pirate party, which came third in a snap election in October. Photograph: Frank Augstein/AP

Iceland’s president has invited the anti-establishment Pirate party to form a government, after the right- and leftwing parties failed in their bids.

Guðni Jóhannesson made the announcement on Friday after meeting with the head of the Pirate’s parliamentary group, Birgitta Jónsdóttir.

“I met with the leaders of all parties and asked their opinion on who should lead those talks. After that I summoned Birgitta Jónsdóttir and handed her the mandate,” he said.

Iceland held snap legislative elections on 29 October, in which none of the seven parties or alliances obtained a clear majority.

The conservative Independence party, which performed best at the polls, initially tried to form a government with the liberal, centre-right Reform party and the centrist Bright Future.

But they failed to find common ground on issues including relations with the EU, institutional reform and fishing.

The president then called on the Left-Green Movement, the second-biggest party, to form a government.

Despite holding talks to build a five-party coalition from the centre-right to the far-left, disagreements over taxes and other issues led the negotiations to collapse in late November.

The president then allowed the parties to hold informal talks, which led the Independence party and the Left-Green Movement to discuss terms for sharing power. But the diametrically opposed parties could not find enough common ground.

Giving the Pirate party, which came third in the election, the chance to build a government has been seen as a bold move that is not guaranteed to be a success.

“I am optimistic that we will find a way to work together,” Jónsdóttir said.

The scandal over the Panama Papers, released in April, ensnared several Icelandic officials and led to the resignation of former prime minister Sigmundur Daviíð Gunnlaugsson, prompting the October vote.

With voters keen to see political change, the small and controversial Pirate party had vowed during the election campaign to implement radical institutional reforms for more direct democracy and greater transparency in public life.

It won 14.5% of votes, less than pollsters had predicted.

(NYT) Iceland’s Prime Minister Resigns, After Pirate Party Makes Strong Gains

(NYT) REYKJAVIK, Iceland — Iceland’s prime minister announced on Sunday that he would resign, as the insurgent, anti-establishment Pirate Partycapitalized on a wave of anger over corruption to come in second place in the country’s general election.

The prime minister, Sigurdur Ingi Johannsson, announced his departure on national television after his center-right Progressive Party’s share of seats in the 63-seat Parliament collapsed to eight from 19 in the previous election, in 2013.

Mr. Johannsson’s predecessor as prime minister, Sigmundur David Gunnlaugsson, was forced from office in April amid accusations of conflicts of interest after revelations in leaked documents, known as the Panama Papers, of the hidden wealth of the country’s elite.

The conservative Independence Party, which has been in a governing coalition with the Progressives, came in first with 21 seats, up from 19 in the last election.

But the big winner in the election on Saturday was the four-year-old Pirate Party, which took 10 seats, more than tripling its showing of three seats in the last general election. The Left-Green Party also won 10 seats. The left-leaning parties — the Left-Greens, the Pirates and two allies — won 27 seats over all, just short of a majority.

The liberal Regeneration Party, which is expected to play the role of kingmaker, has ruled out joining a coalition with the current governing establishment parties. This means that left-leaning parties could potentially form a governing coalition.


Prime Minister Sigurdur Ingi Johannsson’s Progressive Party saw its share of seats in Parliament collapse. CreditGeirix/Reuters

While the conservative Independence Party made gains, “it is not a return to the status quo,” said Andres Jonsson, a political consultant. To form a government, the party will have to extend its hand to smaller, more rebellious groups, he said.

“The traditional party system has been disrupted,” Mr. Jonsson said. “We are not seeing big movements of people who feel that they are able to relate with the messages of the big coalition parties. Changes are going to come from the outside, not from inside the old parties.”

The election for Iceland’s Parliament, the world’s oldest, highlighted the fragmentation of the political landscape. A dozen parties fought for power over an electorate of about 260,000, barely enough to fill three American football stadiums.

Birgitta Jonsdottir, the anarchist leader of the Pirate Party, said she was satisfied with the result. “Whatever happens, we have created a wave of change in the Icelandic society,” she told a cheering crowd here early Sunday.

About 40 percent of Pirate supporters are under the age of 30. They had pinned their hopes on a party that has promised to install a more inclusive and transparent government.

The Pirates have pledged to enhance direct democracy by passing the world’s first “crowd-sourced constitution,” drafted by Icelandic civilians rather than politicians. Parliament blocked the document in 2013.

The party also wants to redistribute wealth and increase the government’s anticorruption powers. (The country is already the 13th least corrupt country in the world, according to Transparency International, a watchdog group, ahead of the United States.)

“We want to see trickle-down ethics rather than make-believe trickle-down economics,” Ms. Jonsdottir, 49, who is also a former WikiLeaks activist, said in an interview on the eve of the election.

Strong anti-establishment feeling has swept through Iceland since the financial crisis, and has been aggravated by the Panama Papers scandal in April, which sent thousands of protesters into the streets. The Pirate Party has benefited from a wave of dissent that has swept through Europe and the United States, upending traditional politics and fracturing mainstream parties.

In 2008, Iceland’s economy collapsed after its banking sector, fresh from deregulation, grew exponentially. In the years before that, Icelanders binged on credit, some becoming billionaires overnight. By 2006, the average Icelander was 300 percent wealthier than three years earlier. Cronyism became rampant.

When the crisis hit, Icelanders were plunged into debt and banks racked up losses of billions of dollars, many times more than the size of Iceland’s economy.

Today, the economy has recovered, partly thanks to booming tourism. But public anger still runs deep.

“We are a platform for young people, for progressive people who shape and reshape our society,” Ms. Jonsdottir told Agence France-Presse. “Like Robin Hood, because Robin Hood was a pirate, we want to take the power from the powerful to give it to the people.”

(LB) “The Pirates Are Coming” – Iceland’s Pirate Party Polls at 43% Following the PM’s Resignation

(LibertyBlitzkrieg) The most fascinating and encouraging political movement occurring anywhere on earth at the moment is taking place in the tiny nation of Iceland. No, it has nothing to do with the recent resignation of the country’s Prime Minister after it was discovered via the Panama Papers that he and his wife owned Icelandic bank debt through an undisclosed offshore vehicle. What I’m referring to is the exponential popularity of the less than four-year-old “Pirate Party.”

So what is the Pirate Party? Motherboard explains:

Over 20,000 protesters descended on the Icelandic capital of Reykjavik last week following the release of the Panama Papers, over 11 million files from the database of Mossack Fonseca, one the world’s largest offshore law firms. Gathered in front of the Icelandic Parliamentary building, the protesters were calling for the resignation of their prime minister Sigmundur Davíð Gunnlaugsson after the Panama Papers revealed that he and his wife had major financial conflict of interest tied up in a shell company in the British Virgin Islands.

On Tuesday, Gunnlaugsson bowed to the will of his constituency and appealed to Icelandic president Ólafur Ragnar Grímsson to sign for his release and hold a recall election. Gunnlaugsson’s request was denied and instead Grímsson requested Gunnlaugsson to resign and appointed Sigurður Ingi Jóhannsson, Gunnlaugsson’s deputy, as the new prime minister.

Many Icelanders have criticized this move as a meaningless political reshuffling, seeing as Gunnlaugsson is still retaining his position as chairman of the Progressive Party and a member of Parliament, and nearly two-thirds of Icelanders say they don’t trust the new government.

Still others saw this as nothing more than a political move meant to suppress the ascendancy of Iceland’s unlikely political champion: the Pirates.

Founded in 2012, the Icelandic Pirate Party was modeled after the Swedish organization of the same name founded six years earlier. An anti-establishment party founded on principles of direct democracy, copyright reform, and personal privacy, the Icelandic Pirate Party elected its first representatives to Parliament in 2013. 

Sounds good to me.

In recent years, the Pirate Party has enjoyed an astounding level of popularity in the country, becoming the most popular political party in Iceland in early 2015. In the wake of the Panama Papers scandal the Party’s popularity has only increased, with a recent poll suggesting that 43 percent of the roughly 320,000 people that call Iceland home support the Pirates.

Although the Pirates have yet to name a candidate for prime minister, Helgadóttir expects the Party to put forth a nomination in the near future. She remains optimistic that the Pirates will have a solid base going into the elections and anticipates the party gaining several more seats in Parliament. Beyond that, said Helgadóttir, she and her colleagues are just taking things one day at a time, waiting to see how Iceland’s political drama unfolds.

“I’m really excited to see who is going to answer our call when we ask people to join us,” said Helgadóttir. “It’s going to be a real party, not just a political party. This is a chance to fix this broken democracy that we have and maybe it will survive this crisis that democracies all around the world are facing. We’re going to have so much fun together, and if [our agenda] goes through, democracy might have some hope in this world.”

And yes, there is a United States Pirate Party.

For related articles, see:

Iceland Shows the World How to Deal with the Banksters

(Reuters) Iceland finance minister says won’t resign over Panama Papers leaks

(Reuters) Iceland’s Finance Minister Bjarni Benediktsson said on Tuesday he would not resign over the Panama Papers leaks, which showed he was once had a stake in an offshore investment firm in the Seychelles.

Asked by reporters in London whether he would quit, Benediktsson answered: “No”.

The statement came a week after Sigmundur David Gunnlaugsson resigned as prime minister over the leaked documents which showed his wife owned an offshore company that held debt from failed Icelandic banks.

The International Consortium of Investigative Journalists, which saw the leaked papers from Panamanian lawyers Mossack Fonseca, said they showed Benediktsson and two Icelandic businessmen had power of attorney over a shell company called Falson & Co. created in 2005 in the Seychelles.

The Consortium reported that Benediktsson had confirmed he owned a third of the company and had said it was set up for investing in four apartments in a building which was being built in Dubai, but that the company had been wound down in 2009.

The wider revelations have triggered a political maelstrom in Iceland, further undermining confidence in its political and financial elite. A poll last week showed 69 percent of respondents wanted Benediktsson to resign.

+++ V.I. (FT) Iceland PM ‘resigns’ over Panama Papers leak

(FT) Iceland’s embattled prime minister caused fresh consternation Tuesday night by insisting that he had not resigned following revelations about his ties to offshore companies but had merely stepped aside for an “unspecified amount of time”.

Sigmundur David Gunnlaugsson became the first political casualty of the sprawling Panama Papers tax scandal after the disclosures drew more than 20,000 demonstrators to Reykjavik calling for his resignation.

For the second time in a decade, the island of just 320,000 people has become the centre of global attention over financial excesses, even as it remains deeply divided over the collapse of its banks in 2008.

“This is the second phase. The first phase was the practical part of clearing up after a massive banking failure. What we are looking at now is the bankruptcy of politics and certain politicians,” said Huginn Thorsteinsson, a leftwing political consultant.

After the details of Mr Gunnlaugsson’s ties were published, he at first tried to hold on to the premiership by seeking the dissolution of parliament. But after the president refused to grant the request, government ministers said he would step down as prime minister but carry on as the head of his centre-right Progressive party.

Mr Gunnlaugsson later denied that he had formally proposed a dissolution of parliament, in effect accusing the president of lying. Then a government spokesman denied that Mr Gunnlaugsson had in fact resigned, saying that he had merely asked Sigurdur Ingi Johannsson, the minister of fisheries and agriculture, to take over as prime minister temporarily.

The claim by the spokesman, sent in an email to foreign journalists, set up another day of political drama.

With his resignation Mr Gunnlaugsson became the second centre-right prime minister in Iceland to be forced out in recent years by popular protest after the so-called pots and pans revolt of 2009 led to the resignation of Geir Haarde and the formation of the country’s first leftwing government.

The current two-party coalition plans to continue in government ahead of scheduled elections next year, but this could spark a popular outcry. On Monday evening as many as 22,000 people took to the streets of Reykjavik — more than during the 2008-09 financial crisis — to protest at Mr Gunnlaugsson’s alleged conduct.

“It is causing huge anger in the Iceland because of the connotations with the banks in the past,” Mr Thorsteinsson said.

Opposition parties on Tuesday called for new elections, saying the public no longer trusted the government. “I believe that the issue is so serious that the people should have an opportunity to elect a new parliament,” said Katrin Jakobsdottir, leader of the Left-Green Movement.

Mr Gunnlaugsson once owned part of an offshore company, now controlled by his wife, that owned claims in the three Icelandic banks that collapsed in 2008, roiling the country’s financial and political systems.

Although Iceland’s economy has recovered strongly since the crisis, it remains deeply divided politically and socially with low trust ratings for politicians and the parliament. The anti-establishment Pirate party topped opinion polls before the offshore revelations, scoring more than the two government parties combined.

“The protests probably won’t stop until there are new elections. What they are asking for is a complete makeover of politics,” said Mr Thorsteinsson, an adviser to the previous 2009-13 centre-left government.

Mr Gunnlaugsson won his 2013 election campaign and based his subsequent premiership on promises to punish the creditors of Iceland’s failed banks and use the money he extracted from them to reduce the large household debt that built up in Iceland both before and after the crisis.

He also halted the previous government’s negotiations to join the EU and committed himself to the Icelandic krona by attempting to lift capital controls.

“He’s been quite vocal in saying that the Icelandic krona is so good. So people say: why do you have you assets in Tortola [in the British Virgin Islands], why we have to suffer here?” said Mr Thorsteinsson.

The Progressive party nominated Mr Johannsson to replace Mr Gunnlaugsson. Bjarni Benediktsson, finance minister and the head of the other governing party, said he hoped to keep the coalition together but added that he did “not fear new elections” and would discuss the future with Mr Johannsson. Some observers see him as a possible new prime minister even though he was also forced recently to admit that he used to own part of an offshore company.

Both Messrs Gunnlaugsson and Benediktsson have denied any wrongdoing in connection with their ownership of offshore companies.asdert

+++ (GUA) Iceland’s PM faces calls for snap election after offshore revelations

(Guardian)  Iceland’s prime minister is this week expected to face calls in parliament for a snap election after the Panama Papers revealed he is among several leading politicians around the world with links to secretive companies in offshore tax havens.

The financial affairs of Sigmundur Davíð Gunnlaugsson and his wife have come under scrutiny because of details revealed in documents from a Panamanian law firm that helps clients protect their wealth in secretive offshore tax regimes. The files from Mossack Fonseca form the biggest ever data leak to journalists.

Opposition leaders have this weekend been discussing a motion calling for a general election – in effect a confidence vote in the prime minister.

On Monday, Gunnlaugsson is expected to face allegations from opponents that he has hidden a major financial conflict of interest from voters ever since he was elected an MP seven years ago.

The former prime minister Jóhanna Sigurðardóttir said Gunnlaugsson would have to resign if he could not regain public trust quickly, calling on him to “give a straightforward account of all the facts of the matter”.

The former finance minister Steingrímur Sigfússon told the Guardian: “We can’t permit this. Iceland would simply look like a banana republic. No one is saying he used his position as prime minister to help this offshore company, but the fact is you shouldn’t leave yourself open to a conflict of interest. And nor should you keep it secret.”

Leaked papers show Gunnlaugsson co-owned a company called Wintris Inc, set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments with his wealthy partner, later wife, Anna Sigurlaug Pálsdóttir.

The couple were living in the UK at the time and had been advised to set up a company in the tax haven in order to hold and invest substantial proceeds from the sale of Pálsdóttir’s share in her family’s business back in Iceland.

Gunnlaugsson owned a 50% stake in Wintris for more than two years, then transferred it to Pálsdóttir, who held the other 50%, for one dollar. The prime minister’s office now says his shareholding was an error and “it had always been clear to both of them that the prime minister’s wife owned the assets”. Once drawn to the couple’s attention in late 2009, the error was corrected.

Towards the end of Gunnlaugsson’s time as a Wintris shareholder, having returned to Iceland, he was elected to parliament as leader of the Progressive party.

Gunnlaugsson, who became prime minister four years later, never disclosed his Wintris shares on Iceland’s parliamentary register of MPs’ financial interests.

Nor has he spoken about the offshore company publicly – until questioned by the Guardian and other media working in conjunction with the International Consortium of Investigative Journalists.

When first asked if he had ever owned an offshore company, Gunnlaugsson said: “Myself? No. Well, the Icelandic companies I have worked with had connections with offshore companies … but I can confirm I have never hidden any of my assets.”

Asked what he knew about Wintris, he initially said: “Well, it’s a company, if I recall correctly, which is associated with one of the companies that I was on the board of.” Shortly afterwards, Gunnlaugsson ended the interview.

Public statements
The prime minister and his wife then rushed out separate public statements in Icelandic condemning reporters’ intrusions into their private business matters.

Both stressed their financial interests had always been properly disclosed to the Icelandic tax authorities. The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.

The prime minister now accepts he did jointly own Wintris with his wife. Copies of the share certificate in his name and of Wintris’s share register are published today by the Guardian.

He nevertheless insists he did not have to declare his shares on the parliamentary register because Wintris was a holding company, not a “commercial company”.

He was elected to parliament in April 2009 and did not transfer his Wintris shares to Pálsdóttir until the last day of that year. A copy of the transfer agreement is published here.

Asked if he had nevertheless breached the spirit of the disclosure rules, the prime minister declined to reply. He conceded there might be a case for tightening the rulebook.

Leaked Wintris documents show in detail the layers of complexity associated with such BVI companies, masking the identity of those in charge.

They also raise uncomfortable questions about how Gunnlaugsson could have remained unaware – for more than two years – that he was the owner of 50% of Wintris and its considerable investments.

The instruction to set up Wintris first came through agents in Luxembourg, who contacted Mossack Fonseca, an international law firm specialising in offshore secrecy. A registered office was set up in the BVI and three nominee directors recruited from Panama.

Power of attorney
Names of the Panamanian directors appear on almost all of the company’s official paperwork for the first three years, but it was Gunnlaugsson and Pálsdóttir who held the authority to control the firm, having privately been granted power of attorney over Wintris’s affairs.

Five months after it was set up, the company also made arrangements to open a bank account at a London branch of Credit Suisse. By then, the involvement of Gunnlaugsson and Pálsdóttir in the activities of Wintris was well hidden from the public gaze.

Later that year, Iceland became one of the most severe casualties of the global credit crisis. Financial meltdown meant the country was forced to seek bailout loans and impose currency controls as foreign investors rushed to sell out of the rapidly devaluing Icelandic króna.

While Wintris was shielded from some of this turmoil, it had invested in bonds issued by three Icelandic banks and was owed more than 500m Icelandic króna (£2.8m) when they all collapsed. Only a small fraction of that sum is likely to be recovered.

Revelations from the Panama Papers about Gunnlaugsson and Pálsdóttir’s offshore activities are awkward for Iceland’s prime minister, who has made a name for himself defending the collapse of his country’s financial system against the demands of foreign creditors, whom he has repeatedly characterised as “vultures”.

He has dismissed suggestions that his wife’s ownership of Wintris compromised him as prime minister. On the contrary, he suggested, his consistently tough approach to foreign creditors, including Wintris, demonstrated that his wife’s financial interests had never affected his decision-making.

Icelanders’ suspicions
For some years many ordinary Icelanders have grown suspicious about wealthy Icelanders and their use of offshore companies, concerned such arrangements are designed to avoid tax.

To pursue investigations in this area, Iceland’s tax office last year paid a whistleblower for a cache of data from Mossack Fonseca’s regional office in Luxembourg. As a result, tax inspectors are said to have in their hands the private details of up to 400 Icelanders with interests in tax havens.

There is no suggestion of tax avoidance in the case of Wintris, but the prime minister said he and his wife had “always assumed” the whistleblower data could include information on Wintris. He said he supported the tax office’s ongoing inquiries.

But Benediktsson’s name also appears in the Panama Papers as he previously owned a third of a company called Falson & Co, incorporated in the Seychelles. Benediktsson’s interest in Falson was held through bearer share certificates, which do not record the name of the owner.

He told the Guardian the company had been set up with two co-investors to buy a property in Dubai, but the deal had fallen through in 2009 and he had had no dealings with the company since.

In a television interview last year, Benediktsson was asked if he had ever done business in tax havens. “No, I haven’t done that,” he said. “I have not had any assets in tax havens – not done anything like that.”

Asked why he had not mentioned Falson, Benediktsson said he had not realised it was based in the Seychelles. He had thought it was in Luxembourg.

Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins