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Credit crunch claims Iceland's coalition

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Credit crunch claims Iceland's coalition

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The world financial crisis has claimed its first high-profile victim – the government of Iceland. Prime Minister Geir Haarde met President Olafur Ragnur Grimsson to announce his resignation, as his coalition had collapsed after weeks of pressure in economic circles and on the streets. Ingibjorg Gisladottir took her Social Democrats out of the coalition, but ruled out running for Prime Minister herself.

“It is imperative that we do not lose momentum in our strategy with the IMF,” said Haarde. “It is vital that we maintain financial credibility and that the country keeps responsible government until the elections, probably in May.” Pressure had been building on Haarde for weeks. Increasingly vocal street demonstrations had lambasted his coalition’s handling of the economy since the financial storm broke in October, and ended a decade of prosperity. It also sparked renewed debate over whether Iceland should join the European Union. Iceland’s aggressive policy of international acquisitions and expansion left it vulnerable to the downturn, with banks crashing and the kronur going into freefall. The future is uncertain. The President is charged with finding some kind of administration to run the country until new elections, and political parties are already jockeying for position. The Left-Green alliance is favoured by many, with voters demanding clear changes in Iceland.