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Iceland's prime minister resigns in wake of Panama Papers controversy

He is facing allegations he and his wife used an offshore firm to hide investments.

Iceland Offshore Accounts A demonstration outside Iceland's parliament yesterday. Source: Brynjar Gunnasrson/PA

Updated 8.38pm

ICELAND’S PRIME MINISTER resigned today, becoming the first political victim of a mushrooming worldwide scandal over hidden offshore financial dealings exposed in the so-called Panama Papers.

Sigmundur Davíð Gunnlaugsson is the biggest casualty so far of a worldwide media probe into 11.5 million leaked documents that purportedly reveal the offshore financial activities of 140 political figures, including 12 current or former heads of state.

“The prime minister told [his party's] parliamentary group meeting that he would step down as prime minister and I will take over,” the Progressive Party’s deputy leader Sigurdur Ingi Johannsson told a live broadcast.

A series of other leaders and stars named in the leaked papers have hit back at the allegations, denying any wrongdoing despite the international furore.

Those named include Russian President Vladimir Putin’s associates, Chinese President Xi Jinping’s relatives, British Prime Minister David Cameron’s late father and celebrities such as Argentine footballing great Lionel Messi.

Iceland’s leader had been under immense pressure after the papers, leaked from a Panamanian law firm, appeared to show that he and his wife Anna Sigurlaug Palsdottir owned an offshore company in the British Virgin Islands and placed millions of dollars there.

Though the prime minister denied ever hiding money abroad, pressure on his government had mounted, with egg-throwing protesters gathering in the streets today and fresh demonstrations planned for tomorrow.

Earlier the president refused him permission to dissolve the country’s parliament.

President Olafur Ragnar Grimsson, who cut short a visit to the US to return to Reykjavik earlier to deal with the crisis, told a televised press conference he wanted to consult the government’s junior coalition member before making a decision.

Huge protest

Huge crowds poured into the square outside parliament in Reykjavik last night calling for the prime minister to step down over financial records showing that he and his wife bought a company in the British Virgin Islands in 2007.

He sold his 50% share to his wife for a symbolic sum of $1 at the end of 2009.

But when he was elected to parliament for the first time in April 2009, as a member of the centre-right Progressive Party, he neglected to mention his stake in his declaration of shareholdings.

Source: Associated Press

Bankers

As the crowds gathered outside parliament, he told public broadcaster RUV he regretted not revealing this sooner.

The issue is particularly sensitive in Iceland, a country marked by the excesses of the 2000s when senior bankers used shell companies in tax havens to conceal their dealings in risky financial products.

Police said the crowds that turned out in Reykjavik last night outnumbered the thousands who in 2009 brought down the right-wing government over its responsibility in Iceland’s 2008 banking collapse.

Source: Associated Press

Iceland’s big banks collapsed in October 2008 after borrowing beyond their means to fund ambitious investments abroad. Before their collapse, their liabilities were worth more than ten times Iceland’s total GDP.

The crash led to an unprecedented financial crisis, a deep recession and a bailout from the International Monetary Fund.

Tax havens

Gunnlaugsson, a former journalist, insists that despite the financial turbulence he was never tempted to move his money offshore and that his wife paid all her taxes in Iceland.

“She has neither utilised tax havens nor can you say that her company is an offshore company,” Gunnlaugsson said on his website.

Source: Associated Press

In an interview with Swedish public television SVT recorded last month, excerpts of which were aired in Iceland on Sunday, he became visibly upset after being repeatedly asked about his wife’s company, eventually storming out of the room.

“It’s like you are accusing me of something,” he declared.

Source: videos hahaha/YouTube

‘Lack of faith’ in Iceland 

Elected prime minister in 2013, 41-year-old Gunnlaugsson was seen as a refreshing change from the political old guard, which was accused of having turned a blind eye to the banks’ reckless investments.

His wife, also 41, is the daughter of a businessman who made a fortune from having Iceland’s only Toyota dealership.

On 15 March, before details of the Panama Papers appeared in international media, she took to Facebook to acknowledge the existence of Wintris, the company that she and Gunnlaugsson acquired in 2007 to manage her inheritance from her father.

She said that with the help of international consultancy KPMG she had made sure to pay all her taxes in Iceland.

Source: Associated Press

“The prime minister should immediately resign,” former Social Democratic prime minister Johanna Sigurdardottir said in a message posted on Facebook earlier.

Gunnlaugsson had “displayed his lack of faith in the Icelandic currency and economy by placing his money in a tax haven”, she wrote.

‘I won’t quit’

Iceland Offshore Accounts Iceland's Prime Minister Sigmundur David Gunnlaugsson, writes during a parliamentary session in Reykjavik yesterday. Source: Associated Press

Gunnlaugsson insisted yesterday he would not resign.

“I have not considered quitting because of this matter, nor am I going to quit because of this matter,” he told Channel 2 television.

A source of particular embarrassment for Gunnlaugsson, who led a public revolt against the drastic repayment conditions initially imposed by countries whose citizens lost money in the banking collapse, is the fact that Wintris is listed among the banks’ creditors, with millions of dollars in claims.

“It is sad that those who … say they will lead by example [and] say that the big plan is to believe in Iceland then decide that their money is better kept elsewhere,” prominent Icelandic historian and intellectual Gudni Johannesson told RUV.

- © AFP 2016

Read: The Panama Papers have already caused massive political disturbance>

Read: The Panama Papers: The Irish connection>

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