ICELAND

Iceland’s status performance holds steady at rank 10.

The financial crisis delivered a crippling blow to Iceland’s banking and economic system. Within one week in October 2008, the country’s three main banks (comprising 85% of the banking system) collapsed triggering a sharp decline in economic indicators. It was the deepest and most rapid financial crisis recorded in peacetime history, and the first of such magnitude in an advanced country.

In early 2009, the Social Democrats left the coalition with the right-wing Independence Party and formed a new minority government with the Left Green Movement. General elections in April 2009 resulted in a majority for this new coalition.

At rank 13, Iceland’s democracy is in good shape.

Candidacy procedures are well established, and the voting procedure is free of restrictions. All parties and candidates have equal access to media.

The media environment is open, free and balanced, although the two main papers are considered partial to their owners.

The state respects and protects civil rights, and the courts effectively protect citizens. The constitution guarantees basic individual political rights and liberties. The Icelandic state authorities and administrative bodies act in accordance with the rule of law.

Iceland fell by 7 ranks in the economic policy performance category, reflecting its difficulty in handling the consequences of the 2008 banking crisis.

The crisis affected all areas of the economy, serving a serious blow to the labor market, tax collection and the federal budget at once. A parliamentary report identifies the Icelandic government, central bank and financial supervisory authority as negligent in exercising their duties before the crash.

The economic policy aganda pursued by the new Social Democrats/Left Green coalition centers on implementing the IMF-supported rescue package inherited from the previous government, with some progress made.

At rank 7, Iceland’s rating on social affairs has slid slightly relative to the SGI 2009.

Inequality was on the increase even before the economic crisis of 2008. The government’s social policy has to date seemed unable to arrest this development.

High-quality health care is provided in a relatively efficient manner. Labor market participation rates by women are among the highest in the world.

Pension policy is conducive to poverty prevention as well as to fiscal sustainability; however, pension funds’ heavy crisis-related losses damaged the private pillar of the pension system.

The laws governing immigrants’ civil rights are primarily based on Danish laws, which are considered to be among Europe’s most restrictive.

The country maintains no military force, a unique state of affairs in the world today. From 1946 to 2006, NATO maintained a US military base on Iceland. The US government withdrew its military from the base against the wishes of the Icelandic government.

Iceland has always been a secure place to live, with relatively few assaults, burglaries and other crimes against citizens. Riots and protests at the end of 2008 and in early 2009 led to some minor injuries and some arrests. Internal security is somewhat mitigated by the fact that there has for a long time been a shortage of staff in the police force.

Iceland ranks 7th in the SGI’s resources category.

Environmental policy has not been a high priority on the political agenda for some time. However, the Left Green Movement has been in charge at the Ministry of the Environment since early 2009, exercising or at least expressing a more careful approach to nature.

The country’s pre-crisis R&D spending topped the OECD’s list. The government fosters research and innovation in the fields of geothermal energy, hydrogen power, genetics and information technology, and has lately increased efforts to spur innovation.

Public expenditure on education has increased in recent years. However, the average Icelander aged 25 to 64 has up to two years of schooling less than the OECD average.

At position 8, Iceland ranks lowest among the Nordic countries, but still ranks among the upper middle range in the Management Index (-2 ranks relative to SGI 2009).

Iceland’s steering capability is considered below average primarily because the government lacks a reliable long-term strategic framework in which to pursue policies. In addition, impact assessments do not exist. Nonetheless, strong party discipline means that policies are implemented relatively smoothly.

Although Iceland is not a member of the EU, it is nonetheless affiliated with European supranational governance. Institutional arrangements are updated sporadically.

The government demonstrates accountability toward citizens, intermediary organizations and, with some exceptions, the legislative branch.

Showing several particular weaknesses in this period, Iceland’s steering capability ranking has fallen four places relative to the SGI 2009, to rank 20.

Long-term strategic planning in Iceland is often vague and lacks details on execution, supervision and possible revision. The government only occasionally consults academic experts. The Prime Minister’s Office expert staff is minimal compared to that of other ministries, but is nevertheless deemed able to evaluate ministerial draft bills thoroughly. Regulatory impact assessment is not a part of the policy-making process.

Iceland has a long tradition of formal and informal consultation between the government and labor market associations. The government generally speaks with one voice.

At rank 8, Iceland shows a marginal relative improvement (+3 ranks) in policy implementation capacity as compared to the SGI 2009.

Bills envisaged or proposed by the government in parliament rarely fail to be approved. The government thus has substantial influence, and achieves almost all of its policy objectives.

Ministers usually follow party lines in the exercise of their duties and decisions. Individual ministers rarely make independent non-collective decisions.

Grant-based funding for local governments has for years been the source of more or less constant strife between government levels. The country’s economic collapse has clouded the central government’s ability to provide sufficient funding.

At rank 7, Iceland’s institutional learning capacity is well developed.

Though not an EU member state, the country has integrated and adapted EU structures to a considerable extent since 1994 as a member of the European Economic Area. Under the EEA agreement, Iceland is obliged to adopt around 80% of EU law. Iceland’s government is an active participant in international forums, but seldom initiates measures intended to shape or better international policies.

Monitoring of institutional governing arrangements does not occur on a regular basis. The government is trying to strengthen its strategic capacity by transforming and merging ministries.

At rank 6, Iceland’s executive accountability remains high by OECD standards, despite declines relative to the SGI 2009.

Citizens are comparatively well informed about government policy. Most are familiar with policies in general, and more so with respect to policies that affect them directly.

Standing parliamentary committees are entitled to request almost all government documents needed in the course of their work, but cannot force the government to give up classified documents.

Some newspapers and the main TV and radio stations provide fairly substantive in-depth information on government decisions. The main interest organizations have considerable influence on public policy.