It was unclear whether the naming of Fisheries Minister Sigurdur Ingi Johannsson to head the government or the call for early elections would satisfy the thousands of Icelanders who in street protests this week demanded the government resign immediately for early elections.
Gunnlaugsson quit as prime minister on Tuesday after leaked documents from a Panamanian law firm showed his wife owned an offshore company that held millions of dollars in debt from failed Icelandic banks.
The government said the decision to hold elections in autumn would give it time to follow through on one of the biggest economic policy changes in decades – the ending of capital controls introduced to rescue the economy from the 2008 financial crisis.
Johannsson, who had served also as agriculture minister in the government, told reporters the government would further pursue its big projects of the last three years, the largest being the abolition of capital controls.
The opposition has been trying to force a new election with a vote of no confidence in the government, which could lead to a radical political shift.
A few thousand demonstrators, though fewer than on Monday, gathered for another evening of protests in front of the parliament building on Wednesday.
Protesters, already fed up with the financial and political elite after the 2008 banking crisis wrecked their economy, have gathered the last three nights in the capital Reykjavik, some pelting parliament with yoghurt and eggs.
“I feel like I am watching a live show of House of Cards,” Erla Gisladottir, a 32-year-old mother on parental leave, said ahead of the government’s decision to call new elections, referring to a television show about political intrigue.
Polls show the anti-establishment Pirate Party in the lead if a new election is called in the country of 330,000 people, a result with potentially wider impact across Europe where mainstream political parties are fending off populists.
A poll by Icelandic media outlet Visir showed 43 percent of those polled would cast ballots for the Pirate Party if elections were held now, a stunning victory for a group set up by opponents of copyright enforcement rules.
The Pirate Party, which campaigns in favour of transparency and direct democracy, has had a small following in several European countries for a few years but has never before come close to political power.
The Panama documents revealed that Gunnlaugsson’s wife owned a previously undisclosed firm with what the government says is $4.1 million in claims on the island’s collapsed banks. His opponents have said that represents a conflict of interest, because the government is negotiating the value of such claims.
Iceland has struggled to recover from the 2008 collapse of its highly indebted banks, which led to popular protests, the fall of a government and the jailing of many bankers. Many Icelanders still harbour a strong distrust of their leaders.
“I’m here for many reasons,” said Jon Thor Olafsson, a 33-year-old musician who protested near parliament on Wednesday. “To protest the arrogance of the government in its entirety and a ruined financial system in Iceland – as the outrageous number of Icelanders in the Panama Papers shows.”
The leaked documents from a Panamanian law firm that specialises in setting up offshore companies were unveiled this week by news organisations around the world, shining a light on the finances of global politicians and public figures.
Gunnlaugsson and his wife bought a company called Wintris Inc from the Panamanian law firm Mossack Fonseca in late 2007 through the Luxembourg branch of Landsbanki, one of the three Icelandic banks that collapsed in 2008.
Court records show Wintris had investments in bonds in all three of those banks, according to the International Consortium of Investigative Journalists, which coordinated the leaks investigation. It said Gunnlaugsson sold his 50 percent share in Wintris to his wife for $1 on Dec 31, 2009, the year he entered parliament, and violated Iceland’s ethics rules by failing to disclose it.
In a Facebook post on March 15, his wife Anna Sigurlaug Palsdottir said she was the sole owner of Wintris’s assets, and that her husband had been listed as co-owner due to a mistake by the bank, which she said was corrected in 2009. The money came from the sale of her share in her family’s business, she said.
Gunnlaugsson has said his wife’s assets were taxed in Iceland.
The estates of the failed banks agreed with Iceland’s central bank and finance ministry late last year on how to wind down their business ahead of lifting Iceland’s capital controls. Glitnir said in December it had begun paying creditors, whereas Britain got its final payment from the estate of Landsbanki in January. It was not clear whether Wintris was among those creditors who had been paid.