Icelandic Government Collapses

The Althing

The Althing

Icelandic Prime Minister Geir Haarde announced the ruling coalition government has fallen apart, three months after the world credit crisis destroyed the country’s banks and stock market.

Haarde said his center-right Independence Party refused to agree to the proposition that Minister for Social Affairs Jóhanna Sigurdardóttir from coalition party member, the center-left Social Democratic Alliance, take over the role of prime minister. Foreign Minister Ingibjorg Gisladottir had proposed the idea.

The coalition between the two parties had in fact become one between three parties, Haarde said, adding that the Social Democrats had lost their will to continue. Haarde met with President of Iceland Ólafur Ragnar Grímsson and formally resigned as prime minister.

Daily peaceful protests outside the Althing, Iceland’s Parliament, called for the sacking of government officials. Approximately 3,000 people protested daily and Saturday’s protest saw 6,000 people demonstrate.

The protests inspired the Social Democratic Alliance Party to threaten to withdraw from the coalition government, prompting the announcement of general elections to be held in May, two years ahead of schedule.

Commerce Minister Bjorgvin Sigurdsson resigned Sunday, taking blame for what happened. Haarde also announced he would not seek re-election in the next election, citing health reasons.

The Social Democratic Alliance Party also called for the sacking of Finance Minister David Oddsson and closer ties with Europe, including replacing the Icelandic Krona with the Euro.

Haarde and the chairmen from all five political parties will now discuss the formation of the government until the upcoming spring elections. Haarde said he believed that a national government would probably be the best solution and that it was natural for the largest political party—which is the Independence Party, according to the results of the 2007 elections—to lead in such a government.

The PM said he was dissatisfied with the termination of the Independence Party-Social Democrat coalition and that his fears that a cabinet crisis would be added to the economic and currency crisis had materialized. Johanna Sigurdardottir is now the odds-on favorite for the next Icelandic Prime Minister.