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Context of 'January 26, 2009: Government of Iceland Resigns'

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Following the seizure of two Icelandic banks by that country’s government (see October 7, 2008), the British government invokes anti-terrorism legislation to seize Icelandic assets in Britain. Iceland’s Prime Minister Geir Haarde criticizes Britain, saying he is upset and shocked that it has used “hostile” anti-terrorism legislation to freeze Icelandic banks’ assets. However, British Prime Minister Gordon Brown condemns Iceland’s handling of the collapse of its banks and its failure to guarantee British savers’ deposits. He says Iceland’s policies are “effectively illegal” and “completely unacceptable.” Iceland will later threaten legal action against Britain. (BBC 2/2/2009)

Prime Minister of Iceland Geir Haarde calls a general election for the spring, two years early. The decision to have early elections is triggered by the global financial crisis, which has hit Iceland particularly badly. Haarde adds that he will not stand again because he has throat cancer. Two days previously, protesters angry at the economic crisis had surrounded his car, banging on its windows and pelting it with eggs. (BBC 2/2/2009)

Icelandic Prime Minister Geir Haarde announces the immediate resignation of the country’s government. The government became unstable when Iceland was hit particularly hard by the global financial crisis and the government had to take over three major banks. Haarde had already called an early election in Iceland (see January 23, 2009), but could have remained in office until voting. However, talks about continuing until the election with his coalition partner, the Social Democratic Alliance, break down and he leaves office. (BBC 2/2/2009)

Following the resignation of the previous cabinet (see January 26, 2009), a new government is formed in Iceland by the Left-Green Movement and the Social Democratic Alliance. The new government will be in office for only a few months, until fresh elections in the spring. New Prime Minister Johanna Sigurdardottir sets out her government’s plan to deal with the financial crisis. She says her priority will be to replace the central bank’s board, which failed to prevent the collapse of the country’s banking system. She also says she will ask a parliamentary committee to look into joining the EU. (BBC 2/2/2009)

The new Director of National Intelligence (DNI), Dennis Blair, tells the Senate Intelligence Committee that the economic crisis, not global terrorism, is the biggest national security issue facing the US today. “The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications,” Blair says. If the crisis continues for more than two years, Blair says, governments could topple, with all the unrest that would entail. About 25 percent of the world’s governments, mostly in Europe and among former Soviet Union client states, have already experienced “low-level instability,” including government changes, because of the economic climate (see February 1, 2009). Blair also warns of “high levels of violent extremism” as seen during the downturn in the 1920s and 1930s, along with “regime-threatening instability.” He explains, “Besides increased economic nationalism, the most likely political fallout for US interests will involve allies and friends not being able to fully meet their defense and humanitarian obligations.” US allies in Europe are angry over the Obama stimulus bill’s provision to “Buy American,” Blair notes, and says the provision is being used to question the US’s leadership in shoring up the global economy and international financial structure. The biggest beneficiary of this global chaos, Blair says, could be China, if that nation’s government can “exert a stabilizing influence by maintaining strong import growth and not letting its currency slide.” Global coordination is essential to rebuild trust in the financial system and to ensure that the crisis does “not spiral into broader geopolitical tensions,” Blair recommends. (Pop 2/13/2009)


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