Pirate Party Grasps for Power as Icelanders Cast Their Votes

(Bloomberg) -- Icelanders started voting in a snap election that polls show could propel the populist Pirate Party into a ruling coalition after the sitting conservative government became tainted by the Panama Papers scandal.

Braving rain, gusty winds and temperatures not far above freezing, Icelanders starting voting at 9 a.m. on Saturday across the north Atlantic island. Voting closes at 10 p.m. with final results not expected until late into the night.

The election is taking place against the backdrop of rising populism across the western world and what Allianz SE chief economic adviser Mohamed El-Erian called spreading disruptions from the “politics of anger."

Surveys published in the final days of the election campaign point to a defeat for the ruling conservative alliance and victory for opposition parties spearheaded by the Pirate Party and the Left-Green Movement.

Click here for a description of Iceland's main political parties.

“The only thing that's absolutely clear from the polls is that the current government won't survive," Olafur Hardarson, a political science professor at the University of Iceland, said in an interview. "Icelandic society is still dealing with a lot of distrust and hostility toward politicians and the establishment -- political parties and the parliament. So even though we've recovered economically, we're still in a political, moral and a social crisis. That's visible now in the huge following with new political parties.”

The incumbent government agreed to bring the parliamentary elections forward by six months after protesters hurling bananas and yogurt forced then Prime Minister Sigmundur David Gunnlaugsson to resign. He was one of 12 current or former world leaders to become entangled in offshore holdings revealed in the leak that has come to be called the Panama Papers.

His Progressive Party is expected to be punished heavily in the polls, leaving its ally, the Independence Party, with little prospect of retaining power.

On the other side of the spectrum, the Pirate Party is tipped to make strong gains while the Social Democratic Alliance, which won the election in the immediate aftermath of the country's 2008 financial collapse, is tipped to fare particularly badly.

Sveinn Reyr, a heavily bearded man with a Pirate Party pin in his cap, said in an interview at Reykjavik's City Hall that he cast his vote to create a “fairer society” and to stop people from selling state assets to “their private friends.”

Interview with Icelandic party leader

Even so, the Independence Party, which has overseen an economic recovery and taken the final steps to dismantle the capital controls that have been in place since 2008, is set to retain its spot as the biggest after the election and also wield much influence.

"Despite everything not all is lost, even though the two coalition parties won't keep their majority," Bjarni Benediktsson, the country's outgoing finance minister and head of the Independence Party, said in an interview ahead of the vote.

Bendiktsson's party received the backing of 24.7 percent of voters, according to an average of three polls published Friday. The Pirates had the support of 19.9 percent. The Left-Green Movement were third, at an average of 16.5 percent.

Other voters on Saturday cast their ballot against stirring the pot.

"I've always voted for the Independence Party and I don't intend to make any changes to that," said Jon Olafsson, a pensioner in Gardabaer, an Independence Party stronghold. "I'm rather happy with what has been done in this election term. Things are heading in the right direction."

A total of 246,515 people are eligible to cast their ballots. Turnout is traditionally high in Iceland and totaled just under 82 percent in the 2013 election.

The island's smallest municipality, in the island's north-east, has a grand total of 41 voters -- 25 men and 16 women.

--With assistance from Samuel Parker and Sammy Jenkins To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik at valdimarsson@bloomberg.net. To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo