The fallout from the “Panama Papers” claimed its first major casualty on Tuesday as Iceland's embattled prime minister resigned over a dispute about his offshore tax affairs.
The decision to step down marked a dramatic reversal for Sigmundur David Gunnlaugsson, who had declared Monday that he would not be backed into a corner over reports that he and his wealthy wife concealed millions of dollars' worth of investments.
Yet within 24 hours, the public outcry and political pressure got to be too much.
On Monday night, there were rare scenes in the capital, Reykjavik, as thousands of protesters took to the streets. An online petition calling for Gunnlaugsson’s resignation amassed more than 30,000 signatures, equivalent to about a tenth of the population.
The reports were especially awkward for Gunnlaugsson, who was elected on a promise to clean up the mess left by Iceland’s 2008 financial crisis, which had pushed the country to the brink of bankruptcy. He had long campaigned against foreign creditors, whom he often described as “vultures.”
Earlier on Tuesday, Gunnlaugsson had asked the president to dissolve Parliament and call a snap election.
President Olafur Ragnar Grimsson denied the request, saying he wanted to consult with the other political parties, local reports said.
Yet a few hours later, the resignation was announced by Agriculture Minister Sigurdur Ingi Johannsson, deputy leader of the Progressive Party, on Icelandic TV channel RUV.
Gunnlaugsson has vehemently denied that the company his wife set up was a tax haven, and insisted that she always paid her taxes.
“People shouldn’t have to prove their innocence,” he told Iceland's Channel 2 on Monday.
“You can demand inquiries again and again to push people aside. That’s not how our constitutional state works,” he said. “I have not considered resigning nor am I going to resign because of this matter.”
The controversy centers on the leak of more than 11 million financial documents from the Panamanian law firm Mossack Fonseca that show how wealthy and influential individuals around the world use offshore accounts, in many cases to evade taxes.
According to reports by an international consortium of journalists, Gunnlaugsson and his wealthy wife, Anna Sigurlaug Palsdottir, used the law firm to set up a company called Wintris in 2007 in the British Virgin Islands.
On the last day of 2009, records appear to show that he sold half the company to her for $1.
This was just before a new law took effect that would have required him, as a member of Parliament, to declare his ownership.
Opposition leaders say it amounts to a major conflict of interest.
Wintris held investments in the bonds of failed Icelandic banks that lost the company millions of dollars during the 2008 financial crash.
Gunnlaugsson, who has been prime minister since 2013, was responsible for overseeing a deal with the banks’ claimants, which included Wintris. His critics say he had a hidden, personal stake in the outcome.
Gunnlaugsson’s center-right Progressive Party is currently in a coalition government with the Independence Party.
He is one of many high-profile figures to become embroiled in the “Panama Papers” scandal, but the first to lose his job as a result.
During Channel 2’s interview on Monday, Gunnlaugsson apologized for an interview he had walked out of a few days earlier where he was challenged about his offshore accounts.
“If someone associated with a politician owns a foreign company of course that doesn’t look good,” he told Channel 2. “Nonetheless, we must remember this was quite common amongst people with money.”
Boyle is a special correspondent.