(Bloomberg) -- Iceland’s opposition Social Democrats won snap parliamentary elections as the ruling bloc faced voter discontent with high costs of living and housing shortages.
The Social Democratic Party secured 20.8% backing, or 15 seats in the 63-seat legislature, based on a preliminary vote count published by public broadcaster RUV. Incumbent Prime Minister Bjarni Benediktsson’s conservative Independence Party got 19.4%, or 14 seats.
Voters in the north Atlantic nation of about 389,000 have voiced rising anger over elevated inflation and issues stemming from lagging infrastructure spending, such as long hospital queues. Their frustration with high credit costs that put an end to the post-pandemic boom has also weighed on the parties in the ruling coalition.
The backing for the Independence Party that has traditionally dominated the island’s politics dropped from about a quarter of votes received in 2021, even as it outperformed most polls. Benediktsson’s coalition partners fared worse, with the centrist Progressive Party receiving 7.8% backing while the Left Greens falling short of the 5% parliamentary threshold, at 2.3%.
The election comes as the tourism-dependent economy has contracted 1% in the nine months to September following an expansion of 20% over the previous three years. While inflation rate has more than halved from a peak of 10.2% hit last year, the policymakers have signaled they won’t rush easing western Europe’s highest key rate, now at 8.5%.
A vote winner in Iceland doesn’t automatically get the first stab at forming the government, meaning a prospective prime minister will not be known for some time.
Led by Yale-educated Kristrun Frostadottir — a 36-year-old former chief economist of local investment bank Kvika hf — the Social Democrats pledged to get inflation and state finances under control while also seeking to strengthen the welfare system.
In comments televised in the early hours on Sunday, Frostadottir said the result signified “a great appeal for changes” and signaled she was sticking to pledges on “certain welfare issues and issues of justice when it comes to our resourses and taxation.”
“I think many things will have to change in the Independence Party if we are to have such talks with them,” she said, speaking of potential coalition options.
The Social Democrats last won the election in 2009 and tackled the aftermath of Iceland’s financial crisis during the government term ending in 2013.
The party’s victory in the island nation would echo the success of their Labor and Social Democratic counterparts in the Nordic neighbors Norway and Denmark, while center-right forces are in power in both Sweden and Finland.
The frontrunners also favor a clear increase in power supply — an issue that contributed to the dissolution of Benediktsson’s coalition in October.
The opposition Liberal Reform Party, running third with 15.8% of the vote, largely agrees with the Social Democrats on closer cooperation with the European Union and similarly vows to impose a resource fee on the fishing and energy sectors. The duo is seen as likely to try to form an alliance, while they will probably still need other coalition partners.
Even so, the Liberal Reform’s Chair Thorgerdur Katrin Gunnarsdottir said in remarks broadcast by RUV on Sunday that “there are also many things you can find harmony with” with the Independence Party.
(Updates preliminary vote count, opposition leader comment from first paragraph.)
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