Iceland PM Sigmundur Davíð Gunnlaugsson resigned on Tuesday in the wake of documents leaked in the Panama Papers row. Now that has triggered many speculations as to how is he connected to the entire scam or was it out od sheer defamation that triggered the resignation move?
Incidentally, the leaked documents also named his wife possessing secret offshore account worth millions of dollars.
PM to a bank creditor
It is believed that the money owned by his wife was housed in a shell corporation called Wintris, which were a stakeholder in Icelandic banks. So when the country witnessed an economic slump in 2008, Wintris became a creditor to those banks.
Ironically, in his election campaign in 2013, Gunnlaugsson promised that he would act against Iceland's remaining foreign creditors. With the leaks, the actual picture is clear and the people of Iceland felt betrayed, ensued by mass protests demanding for his resignation.
Wintris was established in 2007 in the British Virgin Islands, as a investment by Pálsdóttir and Gunnlaugsson. Not necessarily illegal till then as most shell compabies were established to avoid taxes, the shaming began at a later stage.
When Gunnlaugsson rose to power, he was required to disclose or sell all his stakes in Wintris and he chose to do the later. He sold his stakes to his wife for $1, just the day before the law required him to disclose its existence.
On March 15, when the scam started making news, he was questioned about any offshore investments. Following this, Pálsdóttir wrote a Facebook post disclosing the existence of Wintris and thus her offshore investments.
Meanwhile, International Consortium of Investigative Journalists (ICIJ ) found out that Wintris was claiming $4.2 million in bonds from Iceland's three main commercial banks - Landsbanki, Kaupthing, and Glitnir.
Panama Papers dates back to 2008 economic slump
While the PM is to be blamed completely, there were other factors that added to his records. The major reason behind the 2008 landslide slump was the overconfidence of the Banks in the country who had promised their investors with increased interest, attracting finances form the foreign banks. Bankers started loaning money from foreigners, circulated the money among each other and used it to buy assets whose prices became more and more inflated.
Following this, people started investing in assets and enhancing the country's wealth. This was a move to make Iceland a hub for global finance really quickly. It worked initially and the GDP of the country skyrocketed from $27,000 to about $69,000 in 2008.
Then came the global slump, which collapsed the country's economy almost immediately. The stock market lost 95 percent of its value; unemployment shot up from under 2 percent to over 8 percent. GDP per capita fell by nearly $30,000.
The government that strategised the financial outcome of the country lost power and Gunnlaugsson came into the scene, arguing that Iceland should stand up to its creditors and limit the amount of money to be repayed.
He led a mass rally protesting the creditors and demanded an international bailout that excluded any British money as the latter had invoked a counter terrorism law against Iceland for not paying back its money.
Evidently, Gunnlaugsson played with the nation's sentiments and struck the 'nationalism' chord to come to power. But the very move proved fatal for him when the Panama Papers were leaked. Thus, the fall!