Iceland’s economy was almost entirely based on the herring, that most versatile fish that lives in startling abundance in its freezing seas, before it decided to rebuild itself on the far more fishy foundations of financial alchemy.

But the centre-left future that it seemed to embrace after its economic guts were ripped out five years ago, led by the world’s first openly gay Prime Minister, Jóhanna Sigurðardóttir, will come to a startling end when, in what has been described as the “weirdest” general election in a legitimate democratic country in a generation, it almost certainly returns to office the grand old parties that sold off its banks and humiliated it in front of a fascinated world.

The causes are many, but a particularly ironic one is in plain sight on the streets of the capital Reykjavik. It was snowing the day before yesterday when everyone had the day off work to mark “the first day of summer” (it signifies more the end of hibernation than a race for the sun loungers). On a balcony above a sandwich shop on the main shopping street, a four piece band from Lýðræðisvaktin, in English, The Democracy Shift, struck a strange compromise by singing Christmas carols. They are one of at least 16 brand new parties formed for this election.

Download the new Independent Premium app Sharing the full story, not just the headlines

Lýðræðisvaktin, to borrow from Monty Python, are the Reykjavik People’s Front. Round the corner in a rented shop front, Bright Future, the People’s Front of Reykjavik, if you like, are dishing out biscuits and patiently listening to the rants of local tracksuit-wearing oddballs, who are pleased merely to be out of the cold.

There is genuine confusion as to the exact number of new parties there are. The ‘Household Party’ made the mistake of sending out a press release to announce its existence on April Fool’s Day, and was roundly written off as a joke. Others have sent their leaders to media photo shoots, only to ask the makeup artists to sign endorsements of their candidacy, a constitutional requirement. Another party, the Sturla Jonsson Party, has just one member

But the one thing on which all they all agree is that things must be done differently, that Icelandic politics is broken. These are the parties like The Pirate Party, who have campaigned for strict Freedom of Information Laws. Or Bright Future, who have used online crowdsourcing techniques to try to write a new Constitution for the Country, and who want to end the Punch and Judy Show, say goodbye to the old political establishment, despite its best known candidate, Guðmundur Steingrímsson, being both the son and grandson of previous Prime Ministers.

But under the Icelandic system of proportional representation, the unfortunate consequence of these groups splintering such a significant chunk of the centrist vote into so many tiny pieces, is that the parties who bankrupted the nation will be back in power in the morning. Those who stop briefly to listen to the short inter-song speeches from the Lýðræðisvaktin leader listen for a second, laugh, and declare it “mad”, “nonsense” or “rubbish”. It is one of very few signs there is even an election happening.

Political parties receive state funding in Iceland, and since the crash politicians have realised there isn’t much public appetite for extravagant campaigning. Most of the money is spent online. More than two thirds of the 320,000 population use Facebook. “He is saying,” one man in traditional woollen jumper explains, “that, ‘The umbilical cord of the nation’ should go to the people, not to the corporates.”

It is depressingly illuminating sentiment. According to the Social Democratic Party, who have led a coalition government with the Left-Green movement over the last four years, and done what is regarded as an impressive job in turning the country’s economic fortunes around, but whose share of the vote could drop today by two thirds, from 30 per cent to 10, the Icelandic people cannot accept the umbilical cord has run dry.

“People want to believe they can easily get out of this misery,” says Sigridur Ingibjorg Ingadottir, a Reykjavik Social Democrat candidate, who will almost certainly win enough votes to return to the 63 seat parliament tomorrow, but as part of a far smaller parliamentary party. “They are tired of economic crisis, and they have bought the opposition’s propaganda. We are getting out of it, but it is tough.”

Daily coronavirus briefing No hype, just the advice and analysis you need Enter your email address Continue Continue Please enter an email address Email address is invalid Fill out this field Email address is invalid Email already exists. Log in to update your newsletter preferences Register with your social account or click here to log in I would like to receive morning headlines Monday - Friday plus breaking news alerts by email Update newsletter preferences

The Progressives, the country’s oldest party, which is likely to win the largest share of the vote, received a surge in popularity when the Court of the European Free Trade Association said Iceland could refuse to reimburse British and Dutch savers at the failed online bank Icesave with taxpayers’ money. Its leader, Sigmundur David Gunnlaugsson, pictured, a 38-year-old man who may well be the next Prime Minister, has promised to cut mortgages by up to 20 per cent, believing he can negotiate a far smaller settlement with foreign creditors than previously thought. Unsurprisingly, it is a popular policy, but the devil is in the detail, and as the election looms larger, the polls would suggest more and more people are starting to see through it.

“The debt discount they are offering will just be eaten up by inflation,” said Vikingur Olafsson. He is a 29 year old concert pianist, based in Germany, but back in town for a recital. In a country that sends proportionately more people into higher education than almost anywhere in the world, he is almost alarmingly typical of the type of person you bump into on the street. “I just cannot believe the two parties who caused the biggest bankruptcy in history will be back in power.”



His girlfriend Halla Magnusdottir, has just graduated from Oxford University, and is about to start work as a television news reporter: “I don’t know who I will vote for yet, but not for them,” she said. “But then there’s my friend, he says: ‘Okay, so there’s been a car crash. But then the government has come along and shot dead the survivors.”



It is a sentiment Bjarni Benediktsson, the leader of The Independence Party - by far and away Iceland’s most successful political party since independence 69 years ago, at least until the crash - unsurprisingly agrees with.

“People do not want to see those two parties of the left in government any longer,” he says, in relaxed mood in the Café at at the Althingi, the little stone house by the harbour where the government meets, which yesterday was eerily quiet. “They have absolutely failed to restart the economy, despite the competitive advantage we had that was given to us when our currency went south.”

The battle lines are drawn, too, over membership of the EU and the euro, an area where the disagreement best encapsulates the difference between the two sides. In the words of Hallgrímur Helgason, the country’s most famous novelist: “We have to save ourselves from ourselves. We have to minimize the effect our own politicians can have on our society. We have to get some rules from the outside.”

Bjarni Benediktsson believes the young crowdsourcing reformers are wrong. “I don’t agree with people who claim we don’t need a strong government. That creates chaos.” And he believes, passionately that Iceland, not the euro, can save Iceland from itself. “Does Iceland need to import the discipline that follows through a hard currency? No we do not. We can legislate for it ourselves.” It is a potent point, and one that resonates when the eurozone appears in such disarray. The shocking fact though, is that the man making it is the head of the party that showed a near criminally scant regard for discipline not very long ago.

As well as the election, a new “incest blocking” iPhone app designed to quickly tell young Reykjavikings if they are in fact related to the boy who is buying them very expensive drinks in the city’s lively bars, has been making headlines. But Icelandic politicians like to go to bed with those who look suspiciously like themselves.

Whether Mr Benediktsson, or Sigmundur David Gunnlaugsson of the Progressives, becomes the next Prime Minister in the coalition government the parties will, barring a miracle, form is an extremely complex matter. But whomever it is, the next four years might just be as fascinating as the last.

Timeline: A return from the economic wilderness

April 2008

Iceland’s government warns it may intervene in the country’s currency and stock markets to fight hedge funds it says are attacking Iceland’s financial system.

September 2008

In the US, Lehman Brothers collapses, freezing global money markets.

October 2008

The government takes control of all three of Iceland’s major banks. It emerges the Central Bank almost ran out of cash as people tried to withdraw their money.

November 2008

The IMF approves a £1.4bn loan to help Iceland through its financial crisis.

January 2009

Pepper spray and batons are used by police against protestors in Reykjavik. Most of the 2,000 or so were banging pots and pans, in what was dubbed the Kitchenware Revolution. Prime Minister Geir Haarde calls for a general election for 25 April, two years early, and immediately resigns the government.

April 2009

The Social Democratic Alliance and Left Green movement are elected in a radical swing election, and the world’s first openly gay Prime Minister, Jóhanna Sigurðardóttir, left, is sworn in.

July 2009

Iceland formally applies for EU membership after parliament votes in favour of accession.

February 2010

Unemployment reaches 15,000 – more than 9 per cent of the work force, compared to 1 per cent in early 2008.

2011

Economy shows signs of growth in response to austerity. Unemployment falls fast.

September 2011

Former premier Geir Haarde appears in court, pictured, accused of failures in his handling of the 2008 financial crisis. He is found not guilty of negligence in April 2012.

February 2012

The credit rating agency Fitch raises Iceland’s sovereign rating to BBB-, which makes the country once again fit for investment.

January 2013

Opposition parties receive huge poll boost when a European court clears the former government of failing to guarantee minimum levels of compensation for British and Dutch savers.

27 April 2013

Icelanders go to the polls amidst opposition promises to cut mortgages. Old, centre-right parties have a convincing lead in the polls.