Pressure mounts on Iceland government over PM scandal

REYKJAVIK (Reuters) - Iceland’s opposition filed a motion of no confidence in the prime minister and protesters gathered outside parliament on Monday after the Panama Papers showed his wife owned an offshore company with big claims on the country’s collapsed banks.

The allegations in the leaks released globally over the weekend first surfaced in Iceland last month. But the renewed spotlight has racked up pressure on Prime Minister Sigmundur David Gunnlaugsson.

“I certainly won’t (resign) because what we’ve seen is the fact that, well, my wife has always paid her taxes. We’ve also seen that she has avoided any conflict of interest by investing in Icelandic companies at the same time that I’m in politics,” he told Reuters TV.

“And finally, we’ve seen that I’ve been willing to put the interests of the people of Iceland first even when it’s at a disadvantage to my own family.”

Opponents allege a conflict of interest and say he should have been open about the overseas assets and the company.

His center-right government coalition, in power since 2013, is involved in striking deals with claimants on the bankrupt banks.

A spokesman in the prime minister’s office has said the claims of the firm owned by the prime minister’s wife totaled more than 500 million Icelandic crowns ($4.1 million).

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Crowds outside parliament demanded his and his government’s resignation, beating drums and sounding horns. Organizers said more than 10,000 had gathered.

“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.”

The coalition holds 38 of 63 seats in parliament. It is unclear how the scandal might impact his coalition majority in a vote of no-confidence against him and his government that could take place later this week.

“We’ve seen unprecedented improvements in the Icelandic economy and the living standards of people in Iceland in recent years since this government took office, so we’d certainly like to continue with that work,” Gunnlaugsson added.

Many Icelanders blame politicians for failing to control bankers and for years of austerity after Iceland’s big banks failed in 2008, sending the economy into a nosedive.

An online petition for the prime minister’s resignation had roughly 27,000 signatures late on Monday. Iceland has a population of around 330,000.

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

The details about Iceland make up just part of a huge data leak about possible tax evasion around the globe, much of it released on Sunday by the International Consortium of Investigative Journalists and news organizations.

Reporting by Ragnhildur Sigurdardottir, Anna Ringstrom and Sven Nordenstam; Editing by Niklas Pollard and Andrew Roche