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. Prime Minister Geir Haarde said he was unwilling to meet the demands of his coalition partners, the Social Democratic Alliance Party, which insisted upon getting the post of prime minister to keep the coalition intact. "I really regret that we could not continue with this coalition, I believe that that would have been the best result," Haarde told reporters. Haarde, who has been prime minister since 2006, said he would officially inform the country's president, Olafur Ragnar Grimsson, that the government had collapsed. Grimsson, largely a figurehead, has asked Haarde's government to remain in place until a new administration is formed. Last week, Haarde called elections for May _ bringing forward a contest originally slated for 2011 after weeks of protests by Icelanders upset about soaring unemployment and rising prices. But Haarde said he wouldn't lead his Independence Party into the new elections because he needs treatment for cancer. Foreign Minister Ingibjorg Gisladottir, head of the Alliance party, is expected to start talks immediately with opposition parties in an attempt to form a new government that would rule until the new elections are held. Gisladottir said Monday she won't seek to replace Haarde as Iceland's leader, proposing Social Affairs Minister Johanna Sigurdardottir _ an Alliance member _ instead. "It was an unreasonable demand for the smaller party to demand the premiership over the larger party," Haarde said. He said he hoped a national government, formed from all of Iceland's main political parties, could lead the country until the elections. The Alliance Party also has sought the ouster of central bank governor David Oddsson, Iceland's former prime minister, and sought changes to Iceland's constitution to allow it to become a full member of the European Union. 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 Sunday, citing the pressures of the economic collapse. "We are happy that the government has gone, but now we need to clean up the financial supervisory authority and the central bank," protester Svginn Rumar Hauksson said at a rally Monday outside Parliament. "The protests will continue until it becomes clear that things are really changing." Iris Erlingsdottir: Iceland's Ruling Coalition Dissolves The political situation in Iceland deteriorated further today when Prime Minister Geir Haarde announced the immediate dissolution of the Independence Party's ruling coalition with the Social Democratic Alliance (SDA). On Saturday, Haarde announced that he was suffering from malignant esophageal cancer, and called for new elections on May 9th. After a series of formal and informal meetings over the weekend, he and SDA leader, Foreign Minister Ingibjorg Solrun Gisladottir, were unable reach and agree as to how to proceed until then. However, according to Mr. Haarde, the SDA had dissolved into three separate parties, and was no longer able to finish this term in a responsible manner. These events represent the culmination of a week that saw thousands of demonstrators descend upon Iceland's parliament, the Althingi, in protest of the government's handling of the financial and currency crises that have hit this small island nation over the past four months. Since October 8, 2008, the country's three largest banks failed and were nationalized by the government, with debts of 7-10 times the country's gross national product. The Icelandic krona has plummeted in value, and unemployment has skyrocketed. On Saturday, the largest protest yet was held before the Althingi, with nearly 2% of the nation's population present. Commerce Minister Bjorgvin Sigurdsson announced that we was resigning, and stated that, although he was at fault for his role in these events, many others in the government also had a hand in them, and he called for them to publicly accept responsibility. Noisy demonstrations also were held outside the Hotel Hilton Nordica, where Iceland's Central Bank was holding its annual celebration. Mr. Haarde proposed the creation of a national government to rule until new elections could be held, with participation from the other major political parties. He emphasized the importance of maintaining a reasonable tempo to ensure that government services be provided and that commercial activities continue. Ms. Gisladottir, who returned from Sweden this weekend after undergoing treatment for a brain tumor, said her party demanded "a government with strong leadership that the nation can trust in and a credible and reliable leader to head it. We just need to find the right person." She said she did not consider herself that individual, considering her personal situation. Although the dissolution of the ruling coalition and call for new elections is long overdue, it is more important than ever that the government treat the Icelandic people like adults and tell us exactly what has happened to our country, and who made the decisions that resulted in this mess. Most fingers seem to point at David Oddsson, currently head of the Central Bank, and Prime Minister during the period when the deregulation of the banks took place, but, as Sigurdsson indicated, there is plenty of blame to spread around. More than ever, the first task of the new government should be to hold hearings to investigate these matters. We have lost faith in our government, and must see where we've been before we can see where we're going.
Prime Minister Geir H. Haarde and Foreign Minister Ingibjorg Solrun Gisladottir
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