Panama Papers: How Iceland's leader became the leaks' first casualty

Opposition leaders and thousands of protesters called for the country's prime minister to step down amid a dispute over his offshore financial affairs. On Tuesday, he complied.

Anyone passing the parliament building here Monday afternoon was greeted by young boys banging pots with wooden spoons, adults holding up signs and bananas, and the shouts of tens of thousands of protesters demanding the resignation of Iceland's prime minister.

Families, young people, retirees, and even pets turned out for the demonstration, which coincided with parliament's first session since Easter. They demanded Prime Minster Sigmundur David Gunnlaugsson step down and called for new elections because of leaked documents that opposition lawmakers say show a conflict of interest with his job. On Tuesday, Mr. Gunnlaugsson announced his resignation.

News reports about the so-called "Panama Papers," a massive data leak revealing offshore tax havens for celebrities and politicians across the globe, have alleged that Mr. Gunnlaugsson and his wife set up a offshore company in the British Virgin Islands.

The reports allege that Gunnlaugsson didn’t disclose his involvement in the company, Wintris Inc., when he was elected to parliament as the Progressive Party leader in 2009. 

Gunnlaugsson, who became prime minister in 2013, is accused of a conflict of interest because the company held interests in failed Icelandic banks that his government was responsible for overseeing. The prime minister walked out of a Swedish television interview Sunday after he was asked about the allegations.

The leaks from the “Panama Papers” come at a time of populist pushback against political and business elites in Europe and the United States. The anger is particularly pronounced in Iceland, an island nation of 330,000 people that has long prided itself for its egalitarianism. That pride was severely tested in 2008 when the collapse of the country’s three private banks led to a deep economic depression. Gunnlaugsson has largely disappointed many who had hoped that Iceland’s social contract would be restored in the aftermath of the financial crisis.

Egill Atlason, a Reykjavik resident who attended Monday’s protest, says he's disappointed in Gunnlaugsson not owning up to his apparent mistake.  

"I'm disheartened because he didn't embrace failure," he says, adding that Iceland has done well acknowledging its past mistakes, such as its role in the 2008 financial crisis, and moving on. "It's about taking responsibility."

For many here, the allegations against Gunnlaugsson hit hard because he already was perceived as elitist.

Gutdmundur Ragnar, a lifelong Reykjavik resident and one of the protesters Monday, says he's been unhappy with Iceland’s government for years.  

"Too many promises have been broken," he says. Referring to the Progressive Party's platform to lower debts to foreign creditors following Iceland's three major banks failing in 2008, he adds, "They made promises they would make [a] more equal society." 

Instead, Ragnar says, the government has lowered taxes for the wealthy and created a bigger burden on those who make less.

Many of the protesters carried signs with the phrase, "incompetent government.” Others, including Ragnar, waved bananas. 

"Banana republic," he explains. "It's very hard to get by on a low salary."

Helka Elisabet Adalsteinsdottir and Alma Mjoll, both students at the Iceland Academy of the Arts, understand that first hand. Both women say housing prices have shot up, available student loans are smaller, and health care is increasingly unaffordable. 

"The Icelandic dream was to own your own apartment,” Ms. Mjoll says. “But I can't see that I'd ever own an apartment."

Mjoll says that part of the problem in Iceland is that everyone is too co-dependent, and that people aren't aggressive enough in pursuing change. In any other country where a national leader was found to be on the same list as Russian President Vladmir Putin for holding undisclosed, offshore investments, she says, "there would have been a riot."

Atlason says Monday's protest delivered the government a firm message. 

"We made our point," he says. "In the end, it's at least about the freedom to do those things."

On Monday night, after the crowd dispersed, men in coveralls worked to clean smashed bananas from the parliament building’s walls.