VZCZCXRO2486
PP RUEHAST
DE RUEHRK #0312/01 2421737
ZNR UUUUU ZZH
P 301737Z AUG 06
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 2930
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 REYKJAVIK 000312 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR EUR/NB 
 
E.O. 12958: N/A 
TAGS: PGOV PREL MARR EAGR IC
SUBJECT:  Iceland: Progressive Party Elects New Leadership; Clears 
Decks for Forward-Looking Security Cooperation 
 
REFS: A) Reykjavik 196 
  B) Reykjavik 205 
  C) Reykjavik 279 
 
REYKJAVIK 00000312  001.2 OF 002 
 
 
¶1. (SBU) Summary:  At an August 19 congress, the Progressive Party 
(PP - the minority member in Iceland's ruling conservative coalition 
alongside PM Haarde's Independence Party), replaced former PM 
Asgrimsson as party chair with Minister of Industry and Commerce Jon 
Sigurdsson. Party rank and file and most media shrugged off 
Asgrimsson's farewell speech slamming the USG over the impending 
closure of Naval Air Station Keflavik, instead focusing on whether 
Sigurdsson's charisma will suffice to reverse the party's decline 
under Asgrimsson.  We believe Sigurdsson will be open to cooperation 
with the U.S. on modernizing security ties and strengthening trade, 
but should he fail to reverse the PP's slide by the May 2007 
national elections, Haarde may be forced to seek another coalition 
partner - one more to the left and less open than the Progressives 
to close bilateral security ties with the U.S.  End summary. 
 
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Halldor Bows Out - But Not Quite Gracefully 
------------------------------------------- 
¶2. (U) Iceland's Progressive Party (PP) held a party congress 18-19 
August to elect new leadership after the Progressives' embarrassing 
performance in nationwide municipal elections this May (Ref A).  On 
5 June, PP Chairman Halldor Asgrimsson announced his resignation as 
Prime Minister and his plans to resign from his party seat upon 
election of new party leadership in August (Ref B). 
 
¶3. (SBU) Asgrimsson used his farewell speech at the congress to take 
a parting shot at the U.S., describing the decision to withdraw U.S. 
troops as "a breach of confidence."  Asgrimsson said his former 
Independence Party (IP) colleagues in the coalition had been most 
guilty of having "blind faith" in the U.S.  Local press coverage of 
the speech was mostly matter-of-fact; only opposition-leaning 
newspaper Frettabladid fronted Asgrimmson's criticism of the U.S. 
Rather, most coverage - and PP rank-and-file attendees polled by 
Poloff - portrayed the speech as a less than distinguished final act 
to Asgrimsson's long political career. 
 
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A New Hand at the Helm, but How Much Will Change? 
--------------------------------------------- ---- 
¶4. (SBU) In the leadership elections 19 August, Minister of Industry 
and Commerce Jon Sigurdsson easily won the race for PP Chair over 
Minister of Health Siv Fridleifsdottir, who as party secretary 
through the May elections had shared the blame for the PP's poor 
showing.  Sigurdsson, an economist and Central Bank Governor before 
entering politics, pledged to build unity within the party while 
respecting the work of his predecessor Asgrimsson. Minister of 
Agriculture Gudni Agustsson retained his post as Vice Chair in an 
apparent show of support for the party's defense of agricultural 
subsidies - a policy which the increasingly urbanized population 
does not hold so dear. 
 
¶5. (U) Public discussion was divided on whether Sigurdsson can 
reverse the party's decline.  Morgunbladid, which generally reflects 
the views of PM Haarde's IP, editorialized that Sigurdsson's 
election gave the PP a great chance to get back on its feet. 
Conversely, Frettabladid opined that Sigurdsson's platform breaks no 
new ground, and that retaining the same Vice Chair will only 
solidify the party's stagnation. 
 
¶6. (SBU) In recent statements - including to Ambassador last month 
(ref C) - Sigurdsson has given little indication that he would 
attempt to change his party's focus.  Newly-elected PP Secretary 
Saeunn Stefansdottir confirmed to Poloff after the congress that she 
anticipates little change in the party's platform, but expects that 
the "atmosphere within the party will be much different," in terms 
of generating enthusiasm among the party faithful.  The first 
post-congress opinion poll on 23 August registered little change in 
PP's support. 
 
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Comment 
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¶7. (SBU) It is too soon to say whether Sigurdsson's charisma will 
suffice to win back voters who have abandoned the party. The PP 
suffers from an image as "the party of elderly farmers" at a time 
when Iceland's shifting demographics have eroded the Progressives' 
traditional base.  The PP has thus far failed to give urban 
conservative voters a reason to choose it over the Independence 
Party, which is seen as more confident and forward-looking. 
 
¶8. (SBU) We believe that Sigurdsson will be open to close 
cooperation with the U.S. on security and trade.  In the short term, 
Asgrimsson's departure should help the pragmatic Haarde's effort to 
work with us on refocusing bilateral security cooperation from a 
 
REYKJAVIK 00000312  002.2 OF 002 
 
 
Cold War paradigm toward emerging threats such as terrorism.  Yet if 
Sigurdsson is unable to reverse the PP's slide, the May 2007 
national elections - which Independence is likely to dominate but 
without winning a clear majority - may leave Haarde no choice but to 
partner with the Social Democratic Alliance or even the Left-Green 
Party.  Such a coalition would likely be less enthusiastic about 
close bilateral security ties with the U.S., looking more toward 
NATO and the EU for support. 
 
van Voorst