Iceland Moves Fast To Salvage Government

By: AP
By: AP

(AP) Iceland's center-left Social Democratic Alliance Party was chosen Tuesday to lead the country following the collapse of the island nation's government amid deep economic troubles and intense political discord.

President Olafur Ragnar Grimsson, who largely serves in a symbolic role, said he asked Alliance leader Ingibjorg Gisladottir to form a new coalition government with the Left-Green movement following crisis talks with Iceland's five political parties.

Iceland's previous coalition government fell apart Monday when Prime Minister Geir Haarde, who led since 2006, was toppled by angry protests over the country's slide into economic ruin.

The new government will likely remain in place until May, when early national elections are expected.

Gisladottir, who last week had surgery on a brain tumor, said she will likely appoint Social Affairs Minister Johanna Sigurdardottir as interim prime minister.

"We have taken the baton - the government should be operational before the weekend," Gisladottir told reporters at the president's residence.

Haarde's government was sunk after Iceland's banks collapsed last year with huge debts amassed during years of rapid expansion. Unemployment and inflation have spiraled and the International Monetary Fund predicts Iceland's economy will shrink by about 10 percent in 2009, which would be its biggest slump since Iceland won full independence from Denmark in 1944.

Since the global credit crunch hit, Haarde has nationalized banks and negotiated about $10 billion in bailout loans from the IMF and individual countries. But his government has come under sharp criticism for failing to adequately oversee Iceland's banking system and protecting the once-prosperous nation of 320,000 people.

"We have been given this job, and we'll do our best in a difficult situation," said Steingrimur Sigfusson, chairman of the Left-Green movement. Government posts will be shared between the two parties in the coming days, he said.

Haarde said last week he won't lead his conservative Independence Party into the May elections - moved up from 2011 - because he needs treatment for throat cancer.

Thousands of angry Icelanders have demonstrated against the ousted government in recent weeks, clattering pots and kitchen utensils in what some commentators have called the "Saucepan Revolution."

Though largely peaceful, protesters have doused Reykjavik's parliament building in paint and hurled eggs at Haarde's limousine. Last Thursday, police used tear gas to quell a protest for the first time since 1949.

© MMIX The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.


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