Iceland’s president has refused a request from the country’s embattled prime minister, Sigmundur Davíð Gunnlaugsson, to dissolve parliament and call snap elections until he has had time to consult all of the country’s political parties.

As the island’s political crisis deepened on Tuesday, its president, Ólafur Ragnar Grímsson, flew back early from a US visit to sound out party representatives in parliament, where the leftwing opposition has presented a motion of no confidence in Gunnlaugsson’s centre-right coalition government.

Further mass protests were planned in Reykjavik for later on Tuesday as pressure mounted on the prime minister to resign following revelations in the leaked Panama Papers that his wife owned a secretive offshore investment company with multi-million pound claims on Iceland’s failed banks.

Facebook Twitter Pinterest Protesters in Reykjavik call for the prime minister to resign.

“I need to determine if there is support for a dissolution within the ruling coalition and others,” Grímsson said. “The prime minister could not confirm this for me, and therefore I am not prepared at this time to dissolve parliament.”

Gunnlaugsson had earlier threatened to call fresh elections if his junior coalition partner did not support his bid to stay in office.

The prime minister said on Facebook that he had met the Independence party leader and finance minister, Bjarni Benediktsson, and informed him that if his MPs “did not feel up to supporting the government”, new elections would be held as soon as possible.

Benediktsson, whose name also appeared in the leaked documents from a Panamanian law firm in connection with a Seychelles-based company of which he once owned a third, also returned home from holiday in Florida on Tuesday.

He pointedly declined to back Gunnlaugsson on Monday, saying the leaks were a “heavy blow” to the government.

Failed to declare interest

The leaked documents from the Mossack Fonseca law firm show Gunnlaugsson and his wife, Anna Sigurlaug Pálsdóttir, bought a British Virgin Islands-based offshore company, Wintris Inc, in December 2007 to invest her share of the proceeds of the sale of her father’s business, Iceland’s only Toyota importer.

Gunnlaugsson sold his 50% stake to his wife for a symbolic $1 at the end of 2009, eight months after he was elected to parliament as an MP for the centre-right Progressive party. He failed, however, to declare an interest in the company either then or when he became prime minister in 2013.



Gunnlaugsson’s office now says his shareholding was an error due simply to the couple having a joint bank account and that it had “always been clear to both of them that the prime minister’s wife owned the assets”. The transfer of ownership was made as soon as this was pointed out, a spokesman said. The prime minister denies he was required to declare an interest.

The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.



Gunnlaugsson’s political opponents, however, and many ordinary Icelanders, more than 10,000 of whom staged a mass protest outside parliament on Monday night, are outraged at what they see as an attempt by their prime minister to hide money offshore, even if he has done nothing illegal.

Such allegations are particularly incendiary in Iceland, which was brought almost to its knees in the financial crisis of 2008 by the recklessness of a small group of bankers and businessmen, several of them now in jail, who used offshore companies to conceal their dealings in high-risk financial products.



Plunged into a deep depression, Iceland had to be bailed out by the International Monetary Fund and introduced strict capital controls limiting the amount of money people could take out of the country.

Gunnlaugsson is also accused of a conflict of interest for failing to disclose his involvement with the company.

Wintris held millions of pounds worth of bonds in Landsbanki, Glitnir and Kaupthing, the three big Icelandic banks that collapsed in the crisis with liabilities of more than 10 times the country’s GDP, and whose bankruptcies the prime minister’s government was responsible for overseeing.

Facebook Twitter Pinterest Sigmundur Davíð Gunnlaugsson walks out of an interview after a question on tax havens.

Gunnlaugsson has so far refused to resign, saying repeatedly that he broke no laws and held no money offshore personally, and that he and his wife had always paid all their taxes in Iceland. His policies, which included refusing to repay the failed Icelandic banks’ many foreign creditors in full, always aimed to put the Icelandic people first, he has insisted.



On Tuesday, however, members of Gunnlaugsson’s party called for the first time for him to go. City councillors from his own constituency of Akureyri said he should step down over what they deemed a crisis of confidence.

‘People feel humiliated’

Opposition MPs are much more outspoken. “People just feel humilated,” said Bigitta Jónsdóttir of the radical Pirate party, which opinion polls currently estimate is the country’s largest with the support of between 35% and 42% of the electorate.

“After what happened to this country in 2008 we needed honesty, transparency and integrity from our leaders,” she said. “None of these things have been evident.”

Árni Páll Árnason, the leader of the opposition Social Democratic Alliance, said Gunlaugsson’s position was no longer 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 this position.”











