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Crisis claims Icelandic cabinet | Crisis claims Icelandic cabinet |
(1 day later) | |
Iceland's coalition government has collapsed under the strain of an escalating economic crisis. | Iceland's coalition government has collapsed under the strain of an escalating economic crisis. |
Conservative Prime Minister Geir Haarde announced the resignation of his cabinet, after talks with his Social Democratic coalition partners failed. | Conservative Prime Minister Geir Haarde announced the resignation of his cabinet, after talks with his Social Democratic coalition partners failed. |
He said he could not accept the Social Democrats' demand to lead the country. | He said he could not accept the Social Democrats' demand to lead the country. |
Iceland's financial system collapsed in October under the weight of debt, leading to a currency crisis, rising unemployment and daily protests. | Iceland's financial system collapsed in October under the weight of debt, leading to a currency crisis, rising unemployment and daily protests. |
The economy is forecast to shrink by almost 10% this year. | The economy is forecast to shrink by almost 10% this year. |
The coalition between Mr Haarde's Independence Party and Foreign Minister Ingibjorg Gisladottir's Social Democratic Alliance had been under strain in recent months. | The coalition between Mr Haarde's Independence Party and Foreign Minister Ingibjorg Gisladottir's Social Democratic Alliance had been under strain in recent months. |
Mr Haarde told reporters on Monday: "We couldn't accept the Social Democratic demand that they would lead the government." | Mr Haarde told reporters on Monday: "We couldn't accept the Social Democratic demand that they would lead the government." |
The Independence Party currently controls 25 of the country's 63 parliamentary seats, to the Social Democrats' 18. | The Independence Party currently controls 25 of the country's 63 parliamentary seats, to the Social Democrats' 18. |
Meltdown | Meltdown |
The announcement comes three days after the prime minister called an early general election for 9 May, adding that he would not stand for health reasons. | The announcement comes three days after the prime minister called an early general election for 9 May, adding that he would not stand for health reasons. |
The coalition government, in place since 2007, had been due to remain in place until 2011. | The coalition government, in place since 2007, had been due to remain in place until 2011. |
ICELAND'S WOES October 2008 - Government takes control of three largest banks20 November - IMF approves $2.1bn (£1.4bn) loan for Iceland26 November - Annual inflation rate hits record 17.1%20 January - Economy forecast to shrink by 9.6% in 200923 January - PM Geir Haarde calls snap election for 9 May26 January - Government resigns following breakdown of coalition Reality bites in IcelandTimeline: Iceland's crisisIceland bloggers react to crisisActivists fight Iceland woes | ICELAND'S WOES October 2008 - Government takes control of three largest banks20 November - IMF approves $2.1bn (£1.4bn) loan for Iceland26 November - Annual inflation rate hits record 17.1%20 January - Economy forecast to shrink by 9.6% in 200923 January - PM Geir Haarde calls snap election for 9 May26 January - Government resigns following breakdown of coalition Reality bites in IcelandTimeline: Iceland's crisisIceland bloggers react to crisisActivists fight Iceland woes |
Ms Gisladottir said a more powerful leadership was needed. | Ms Gisladottir said a more powerful leadership was needed. |
"The government's actions in the last weeks and months were not swift enough," she said. | "The government's actions in the last weeks and months were not swift enough," she said. |
Her party is now expected to look for new partners to form a government until the election. | Her party is now expected to look for new partners to form a government until the election. |
President Olafur Ragnar Grimsson said he would not give any party a mandate to form a new government until Tuesday at the earliest. | President Olafur Ragnar Grimsson said he would not give any party a mandate to form a new government until Tuesday at the earliest. |
In recent months the Social Democrats had urged Mr Haarde to fire the central bank governor and move towards closer ties with Europe. | In recent months the Social Democrats had urged Mr Haarde to fire the central bank governor and move towards closer ties with Europe. |
Iceland, a country of about 300,000 people, has traditionally sought to stay outside the EU. | Iceland, a country of about 300,000 people, has traditionally sought to stay outside the EU. |
But last month European Union Enlargement Commissioner Olli Rehn said the island might apply for membership as soon as this year. | But last month European Union Enlargement Commissioner Olli Rehn said the island might apply for membership as soon as this year. |
The extent of Iceland's trouble became evident as conditions tightened in global credit markets last year. | The extent of Iceland's trouble became evident as conditions tightened in global credit markets last year. |
It emerged that the country's banks, which had amassed debt during years of rapid expansion, owed about six times the country's economic output. | It emerged that the country's banks, which had amassed debt during years of rapid expansion, owed about six times the country's economic output. |
Money from around the world had also poured into Iceland because interest rates there exceeded 10%. class="lp" href="Title Link URL">Icelandic Crisis class="" href="Link to thread">We have the opportunity to build a new truly democratic societyStefan Thorgrimsson, Reykjavik class="" href="http://news.bbc.co.uk/2/hi/europe/7853832.stm">Icelandic crisis: your comments | |
Mr Haarde's government responded to the financial collapse by nationalising leading banks. It also negotiated about $10bn in loans with the International Monetary Fund and donor countries. | Mr Haarde's government responded to the financial collapse by nationalising leading banks. It also negotiated about $10bn in loans with the International Monetary Fund and donor countries. |
Commerce Minister Bjorgvin Sigurdsson resigned on Sunday citing the pressures of the economic meltdown. | Commerce Minister Bjorgvin Sigurdsson resigned on Sunday citing the pressures of the economic meltdown. |