COPENHAGEN (Reuters) - Iceland's opposition leader Katrin Jakobsdottir will become the country's new prime minister, after her Left-Green Movement on Wednesday agreed to form a coalition government, state broadcaster RUV reported.
Her party, which emerged as the second biggest party in snap parliamentary elections on Oct. 28, entered coalition talks with the Independence Party, the main partner in the current government coalition, and the Progressive Party two weeks ago.
Current Prime Minister Bjarni Benediktsson of the right-wing Independence Party called the snap election in September, after less than a year in government, as a scandal involving his father prompted a government ally to drop out of his ruling coalition.
The Nordic island of 340,000 people, one of the countries hit hardest by the 2008 financial crisis, has staged a remarkable economic rebound spurred by a tourism boom.
The formation of a broad coalition government could bring an end to political instability triggered by a string of scandals. The previous snap election took place late in 2016, after the Panama Papers revelations showed several government figures involved in an offshore tax haven scandal.
Still, some Left-Green members and voters have criticized the party's plan to enter a coalition with Benediktsson and his Independence Party.
Two of Left-Green's mandates did not support the new coalition, giving the three parties a total of 33 of parliament's 63 seats.
Jakobsdóttir, 41, campaigned on a platform of restoring trust in government and leveraging an economic boom to increase public spending.
She failed to form a left-leaning government earlier this month, but said on election night she was open to forming a broad-based government.
While both the Left-Greens and the Independence Party parties agree that investment is needed in areas like welfare, infrastructure and tourism, they disagree over how it should be financed.
The Left-Greens want to finance spending by raising taxes on the wealthy, real estate and the powerful fishing industry, while the Independence Party has said it wants to fund infrastructure spending by taking money out of the banking sector.
Benediktsson will become finance minister in the new government.
(Reporting by Elias Thorsson; Writing Jacob Gronholt-Pedersen; Editing by Chris Reese and Sandra Maler)