The new government sees Social Democrat MP Oddný G. Harðardóttir join the cabinet as Minister of Finance.

Árni Páll Árnason and Jón Bjarnason have both been relieved of their ministerial duties.

Left Green leader Steingrímur J. Sigfússon is now in charge of economic affairs, trade, fisheries and agriculture.

There are only nine ministers in the new cabinet: five women and four men. It is hoped the internal wrangling and conflict within the government will be reduced in the smaller cabinet.

The government has decided to relieve Jón Bjarnason, the controversial and politically unpopular Left Green Minister of Agriculture and Fisheries, of his duties. And to keep things even between the two coalition parties, Social Democrat Minister of Economic Affairs Árni Páll Árnason will also be let go from the cabinet — his ministry has been accused of being too similar to the finance ministry and the industry ministry to be necessary.

If the party leaders’ plan is agreed, as is likely, Left Green leader Steingrímur J. Sigfússon will become Minister for Economic Affairs, with duties gleaned from three existing ministries; and the Ministry of Finance will come into Social Democrat hands. The Minister for the Environment will also be given responsibilities from the Ministry of Industry, Energy and Tourism in a new environment and natural resources ministry.

The changes will see the number of ministers in the cabinet go down by two.

The husband of Anu Vehviläinen, the former Centre Party Minister of Transport, shot himself with his service gun at the National Bureau of Investigation (NBI) get-together in Joensuu on Friday 25th November.

It is thought that only 10 people were at the party when the officer retrieved his weapon from his locker and discharged it. Local police have confirmed that no outsiders were involved, but say they still have no explanation for the suicide.

In a brief statement, Anu Vehviläinen, who has been married to the officer since 1998 and has one son with him, said the incident came as a complete surprise. “We are concentrating on getting through this crisis. I ask that the media respect the grief of our family,” she added.

In November 1999, another police Christmas party in Helsinki ended in tragedy when an officer fell from the roof and died. There are currently no guidelines about whether alcohol can be consumed in a police station.

The controversy started when the Ministry of Fisheries and Agriculture published its new draft fishing management bill on its website. The government’s promised changes to the current system, aimed at taking control of fish stocks away from a few large businesses and giving it to the people, have proven extremely controversial. Previous efforts have been criticised from diverse quarters as being variously unworkable, unfair and/or economically damaging. Therefore, the latest draft bill was guaranteed to make waves and be the subject of intense debate.

The bill was predictably dissected, discussed and disputed; leading Jón Bjarnason to insist it was only put online for the sake of public consultation. It was, he said, a first draft which he wanted to use public and business opinion to amend and improve. Many were not convinced by this claim however, describing it as backtracking.

The real damage was done when it came to light that the embattled minister had drafted and published the proposed new bill without the knowledge or consent of the Social Democrat Prime Minister, his Left Green party leader the Minister of Finance, or the rest of the cabinet.

When asked repeatedly by journalists about his position, Jón said yesterday that he is still minister, enjoys the support of his leaders and will remain minister. Meanwhile Prime Minister Jóhanna Sigurðardóttir and Minister of Finance Steingrímur J. Sigfússon would not express such sentiments publicly; but neither did they strongly indicate that Jón is about to lose his job.

The draft will be discussed by committees and will likely take some changes before being sent to Althingi as a bill in the coming days. It is thought that the draft bill to parliament will be presented to the president of Althingi on the 29th July.

Among the notable points in the proposed new constitution are that the government would be legally bound to provide unhindered internet access to the public — but that the Lutheran church is the National Church of Iceland is not to be found in the document, Visir.is reported.

The President of the Republic would not be permitted to sit more than three terms, the voices of 15 percent of the electorate would be able to put bills to Althingi and also force parliamentary issues to a referendum.

The number of government ministers would be capped at ten and ministers would be forced to give up their Althingi seats.

Iceland’s natural resources would be designated public property and no private organisation or individual would be permitted to own them or rights connected to them.

The draft articles have been published on the constitutional council’s website for all to see.

(Press release from the Icelandic government):

Prime Minister Jóhanna Sigurðardóttir, Minister of the Interior Ögmundur Jónasson, and National Police Commissioner Haraldur Jóhannessen travelled around the area of South Iceland that has been hardest hit by falling ash since the Grímsvötn volcano began to erupt on Saturday evening. The impact of the eruption is largely limited to a small area of Iceland. Elsewhere, daily life has continued as usual.

The Prime Minister expressed her admiration for the 1,000 South Iceland residents affected by the volcano, citing their optimism and perseverance, and thanked civil defence and volunteer rescue squad personnel for a well-organised and well-executed effort. On Friday the authorities plan to appraise the damage sustained by farmers and tourism operators in South Iceland. “Iceland has been struck by a natural disaster, and the Government is already preparing a number of measures to assist residents, clean up the areas affected by volcanic ash, and return farming and other economic pursuits to normal,” said the Prime Minister at the conclusion of her visit.

(IceNews note: this paragraph appears to already be outdated. See newer news articles on this site) According to geoscientists, the Grímsvötn eruption is diminishing day by day. It is a phreatic eruption that generates large amounts of ash. The ice surrounding the eruption vent melts, and the water in the Grímsvötn lake pulverises the volcanic debris, creating the ash. Every second, about 100 tonnes of volcanic debris is expelled from the volcano, as opposed to 10-20,000 tonnes per second on Sunday, at the peak of the eruption. The plume of ash is now 3-5 km high, down from 8-10 km at this time yesterday and 15-20 km at the height of the eruption. The ash cloud is not expected to extend beyond Iceland in the days to come; therefore, it can be assumed that the ash in the upper atmosphere that is currently disturbing air traffic will disperse or precipitate out and fall to Earth soon.

Air traffic to and from Iceland resumed yesterday and today, and all foreign travellers who were unable to leave the country have now returned home. In the early phase of the eruption, every possible effort was made to ensure travellers’ safety and well-being, and no accidents or mishaps have been reported. The tourism authorities are of the opinion that this year’s tourist season will be as strong as previously projected and that Iceland can expect a record number of travellers to the country during the year.

Libya’s National Transitional Council (NTC) has announced that Denmark is among the nations that had recognised it as a legitimate entity. However the country issued a statement last Thursday saying that it hadn’t changed its official position regarding the NTC.

The statement indicated that it was “In response to news reports that are incorrectly suggesting that Denmark has formally recognised NTC,” AsiaOne News reports.

However despite downplaying the NTC’s claim, officials acknowledged the council was a leading force for creating political stability in Libya, according to the statement: “Denmark recognises – in accordance with the decision of the European Council – the NTC as a relevant dialogue partner.”

It went on: “But at present NTC appears to be the political actor which has the greatest potential to create the positive political dynamic that would ensure an outreach to a broad representation of political actors in the country.”

Other countries that have formally recognised the NTC include Italy, France and Qatar. The council is based in the rebel stronghold of Benghazi in the northeast of Libya.

Steingrimur J. sigfusson also told reporters that possible options to strengthen the government majority in parliament have been discussed but no concrete decisions made or formal negotiations with other parties initiated.

Following the resignation of three Left Green MPs from the parliamentary Left Green Movement and their subsequent support for the recent vote of no confidence against the government, the coalition enjoys a majority of just one MP, RUV reports. When asked, he said that there are currently no plans to try and incorporate The Movement’s members of Althingi into the government; but that all options are on the table. The government still holds a majority and survived the vote of no confidence which means there is no remedy necessary in the very short term, he added.

In the meantime, an IMF delegation arrived in Iceland yesterday evening in preparation for the Fund’s fifth evaluation of its Iceland recovery package. The leader of the delegation told Reuters that there are signs of economic recovery in Iceland and the Minister of Finance told RUV that the IMF package is still on course. The fifth IMF Iceland report is expected in mid-May.

The Left Green Party (which is part of the government) MP Asmundur Einar Dadason voted with the opposition to bring the government down, saying he intends to resign from the parliamentary Left Green group today — something he has now done. His reason for withdrawing support for the government is that he wants the Icelandic EU application to be withdrawn or put on hold with immediate effect and believes the government is pushing ahead too quickly, RUV reports.

The no confidence vote was submitted along with a vote to adjourn parliament until a new national election. That vote was defeated 36-22. Five abstained.

The debate was high in rhetoric and sometimes had an air of theatre: Prime Minister Johanna Sigurdardottir lambasted Independence Party leader Bjarni Benediktsson for threatening to call for a vote of no confidence and neglecting to do so until now. The vote would galvanise the government, the PM said.

Progressive Party leader Sigmundur David Gunnlaugsson said in parliament that he wouldn’t trust the current government to run a hot dog stand in profit, let alone the country. Finance minister and Left Green leader Steingrimur J. Sigfusson retorted that he doesn’t see the opposition as totally useless, saying that he probably would trust Gunnlaugsson to profitably run a hot dog stand; but added that the opposition should be able to see what everyone else can already see: that Iceland is now already recovering from its worst ever recession and exceeding expectations due to good, stable government.

Progressive Party MP Gudmundur Steingrimsson abstained in the voting, saying he had no intention of taking part in the theatrics.

The result of the referendum is now clear, the Act has been rejected by the majority of the voters and is therefore repealed. The turnout of the referendum was high and close to 40% voted for and 60% voted against the law.

***

The Government of Iceland will do all in its power to secure that the referendum outcome will not have a major impact on Iceland´s economic programme and the fiscal consolidation plan which it has been pursuing with a high degree of success.

The referendum outcome calls not for a readjustment but for a reassessment of macroeconomic assumptions; economic and fiscal plans will now be reviewed so as to take into account the consequences of the referendum outcome. A revised prognosis and budget figures will be available no later than in early May.

The Government further remains committed to the economic programme supported by the IMF, which has been progressing soundly. The next review of the programme by the IMF Executive Board, which is scheduled to take place on April 27th, will be delayed by some weeks. Given the current size of its foreign reserves, Iceland will have no difficulty covering its external maturities in the coming years (including EUR 870 million maturing in 2011 and 2012)

The outcome of the referendum will not affect the commencement of payments by the estate of Landsbanki Íslands hf. to priority claimants (including the British and Dutch authorities), where partial payments are scheduled to take place later this year. These partial payments are expected to cover close to a third of priority (depositor) claims. Moreover, latest figures on its assets indicate that the estate will be able to pay over 90% of claims for deposits.

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On 26 May 2010, the EFTA Surveillance Authority ( ESA), initiated infringement proceedings against Iceland, claiming that Iceland is under an obligation under Directive 94/19 on deposit guarantee schemes to ensure that each depositor does receive the payment foreseen by the Directive in terms of a guarantee for the deposit by issuing a letter of formal notice to the Government. The process had not advanced much, as the outcome of the negotiations and later the referendum were awaited, as a positive vote would have made the legal issue immaterial. Following the no vote of the referendum, the Government will proceed to submit its observations, in line with the strong will of the people of Iceland expressed in the vote. ESA can ultimately bring the matter before the EFTA Court. The average duration of court proceedings before the the EFTA Court is one year.

The Icelandic Government has sought to resolve the Icesave dispute all along in good faith and through negotiations with the British and the Dutch Governments.

The outcome of the referendum can however only be interpreted to the effect that the Icelandic people will not accept a deal requiring Iceland to cover costs related to the Icesave deposit insurance guarantees, unless the legal obligation for doing so is clear.

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The Government will emphasize maintaining economic and financial stability in Iceland, and continuing along the path of reconstruction which it began following the economic collapse of 2008. Significant and indisputable progress has been made towards this end.