Iceland's government has collapsed amid financial mess

[240 is Back]

REYKJAVIK, Iceland (AP) - Iceland's government could be ousted from power this weekend, becoming Europe's first to fall as a direct result of the global financial crisis, a spokesman for the prime minister said Saturday.

Thousands of people gathered to protest the government's handling of the economy outside the country's parliament building as Prime Minister Geir Haarde's Independence Party held crisis talks with its coalition partner, the Social Democratic Alliance.

The alliance may seek to oust Haarde and form a minority government with opposition parties until May elections, a spokeswoman for the prime minister said.
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Inflation and unemployment have soared, and the krona currency has plummeted. Haarde's government has nationalized banks and negotiated around $10 billion in loans from the IMF and individual countries. But the country faces a bill likely to run to billions of dollars to repay thousands of Europeans who held accounts with subsidiaries of collapsed Icelandic banks.

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Jan. 26, 2009

REYKJAVIK, Iceland – Iceland's coalition government collapsed Monday, leaving the island nation in political turmoil amid a financial crisis that has pummeled its economy and required an international bailout to keep the country afloat.

Prime Minister Geir Haarde said he was unwilling to meet demands from his coalition partners in the Social Democratic Alliance Party, which insisted upon the post of prime minister in order to keep the coalition intact.

Haarde, who has been prime minister since 2006, said he would officially inform the country's president later Monday that the government had collapsed.

Foreign Minister Ingibjorg Gisladottir, who heads the Social Democrats, is expected to start talks immediately with opposition parties in an attempt to form a new government. That government would sit until new elections are held, likely in May.

Haarde had previously said he wouldn't lead his Independence Party into new elections, because he has cancer.

He told reporters on Monday that he had proposed Education Minister Thorgerdur Katrin Gunnarsdottir, of Haarde's own party, be appointed Iceland's new prime minister — but Gisladottir rejected that offer.

"It was an unreasonable demand for the smaller party to demand the premiership over the larger party," Haarde said.

Iceland has been mired in crisis since the collapse of the country's banks under the weight of debts amassed during years of rapid expansion. Inflation and unemployment have soared, and the krona currency has plummeted.

Haarde's government has nationalized banks and negotiated about $10 billion in loans from the IMF and individual countries. In addition, Iceland faces a bill likely to run to billions of dollars to repay thousands of Europeans who held accounts with subsidiaries of collapsed Icelandic banks.

The country's commerce minister, Bjorgvin Sigurdsson, quit on Sunday citing the pressures of the economic collapse. Sigurdsson, a member of Gisladottir's party, said Icelanders had lost trust in their political leadership.

Thousands have joined noisy daily protests in the last week over soaring unemployment and rising prices.

http://news.yahoo.com/s/ap/20090126/ap_on_bi_ge/eu_iceland_crisis