The Panama Papers: Huge Protests in Iceland After Prime Minister Refuses to Resign

Iceland's government is in tumult following the release of the Panama Papers, a massive document leak from a Panamanian law firm that has exposed the use of offshore tax havens and shell companies by various heads of state and other prominent members of the global elite.

The leak, which includes 11.5 million documents and is being touted as the biggest data dump in history, not only identified Iceland's prime minister the owner of an offshore company set up by the Panamanian law firm Mossack Fonseca, it also implicated his interior and finance ministers.

The chairman of the prime minister's Progressive Party, various wealthy individuals and former top bankers, and at least one senior government advisor, have also been linked to offshore companies, according to German newspaper Süddeutsche Zeitung (SZ), which said it received the trove of Mossack Fonseca documents more than a year ago from an anonymous source.

"The number of suspects is shockingly high for a country of just 330,000 inhabitants," SV noted in its report on offshore activity by Icelandic officials.

Iceland is still recovering from the 2008 global financial crisis, which saw three of the country's biggest banks collapse. Iceland's opposition immediately called on the prime minister and government to resign and planned a no confidence vote. Thousands of protesters took the streets in the capital Reykjavik on Monday to express their outrage over the revelations.

Huge protest going on in Iceland right now #iceland #panamapapers #austurvollur #protest #sigmundur pic.twitter.com/H09TWpnbZd
— Seth Sharp (@sharpseth) April 4, 2016

Most of the fury has been directed at Prime Minister Sigmundur Gunnlaugsson, who failed to disclose in Iceland's register of parliamentary interests that he and his wife co-owned an offshore company, Wintris Inc, that was used to store and invest the proceeds from her sale of a stake in a family business. Even more controversially, Wintris invested in bonds issued by three Icelandic banks during the financial crisis (from which it was shielded as an offshore company) and was reportedly owed more than 500 million Icelandic króna ($4.06 million) when they all collapsed.

Gunnlaugsson abruptly walked out of an interview last month after a journalist from the Swedish television company SVT questioned him about the company.

After briefly discussing offshore companies and denying that he ever used them himself to hide assets, Gunnlaugsson was asked what he could say about Wintris Inc. The prime minister paused, started to talk, then paused again and smiled before finally saying, "My wife sold a part in a family company. It was put in care of a bank, and the bank made some arrangement and this company was the result." He paused again before continuing. "I don't know how these things work, but everything is declared on the tax report from the beginning… and I mean what… "

With that, as the journalist asked him what assets the company held, he got up and walked out of the interview, while continuing to claim he was "unacquainted" with the matters in question and criticizing the reporter for springing the questions on him.

While the allegations about first surfaced in Iceland last month, the renewed spotlight and the large protests have put increased pressure on Gunnlaugsson to come clean or step down. An online petition for Gunnlaugsson's resignation had roughly 23,000 signatures on Monday. Iceland has a population of around 330,000.

Gunnlaugsson has said he won't consider resigning, and insisted that Wintris was set up in accordance with Icelandic law.

"The government has had good results. Progress has been strong and it is important that the government can finish their work," he told Channel 2, a privately-held Icelandic broadcaster. "I will listen to the peoples' stand in the next elections."

Gunnlaugsson said in a blog post last month that his wife's overseas assets were taxed in Iceland, and he added in a subsequent radio interview that he put the interests of the public before his own in dealing with the financial claims.

However, his political opponents and local media outlets have alleged a conflict of interest, and said that Gunnlaugsson should have been open about his overseas assets and the shell company. The prime minister's center-right government coalition, which has been in power since 2013, is involved in striking deals with claimants of the country's bankrupt banks.

Finance Minister Bjarni Benediktsson and Interior Minister Ólöf Nordal are also named in the Panama Papers as having links to offshore companies.

"What would be the most natural and the right thing to do is that (he) resign as prime minister," Birgitta Jonsdottir, the head of the Pirate Party, one of Iceland's biggest opposition parties, told Reuters. "There is a great and strong demand for that in society and he has totally lost all his trust and believability."

Gunnlaugsson's ruling coalition holds 38 of 63 seats in parliament, meaning a no confidence motion that the opposition may bring this week is unlikely to pass.

But mounting public indignation could hurt Gunnlaugsson. Many Icelanders blame the country's politicians for failing to rein in bankers, and for years of austerity implemented after Iceland's big banks failed in 2008, sending the economy into a dive.

"People are boiling with anger here," Stefan Olafsson, a professor in sociology at the University of Iceland, told the Financial Times.

"We've been doing reasonably well in recovering from the financial crisis. But the wounds have never fully healed and loss of trust in politicians and institutions has not been regained. The perception is that nothing has changed," he added.

The head of Mossack Fonseca, Ramon Fonseca, has denied any wrongdoing, but acknowledged that there had been a "limited" hack on the firm's database. He described the hack and Panama Papers leak as "an international campaign against privacy".

Fonseca, who was up until March a senior government official in Panama, told Reuters the firm had formed more than 240,000 offshore companies, the "vast majority" of which he claimed were used for "legitimate purposes.""People are boiling with anger here," Stefan Olafsson, a professor in sociology at the University of Iceland, told the Financial Times.

"We've been doing reasonably well in recovering from the financial crisis. But the wounds have never fully healed and loss of trust in politicians and institutions has not been regained. The perception is that nothing has changed," he added.

"It is only logical new elections take place," Arni Pall Arnason, head of the opposition Social Democratic Alliance, told Reuters on Friday.

The head of Mossack Fonseca, Ramon Fonseca, has denied any wrongdoing but said his firm had suffered a successful but "limited" hack on its database. He described the hack and leak as "an international campaign against privacy".

Fonseca, who was up until March a senior government official in Panama, told Reuters the firm had formed more than 240,000 offshore companies, the "vast majority" used for "legitimate purposes."

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Reuters contributed to this report.