Iceland's center-right Progressives to lead new government

Reuters News
Posted: Apr 30, 2013 9:02 AM
Iceland's center-right Progressives to lead new government

REYKJAVIK (Reuters) - Iceland's Progressive party was asked to form the next government on Tuesday and another center-right party, which shares its plans to ease household debt and end EU accession talks, was seen as its likely coalition partner.

President Olafur Ragnar Grimsson picked Progressive leader Sigmundur Gunnlaugsson as prime minister after the 38-year-old's party made the biggest gains, taking as many seats in parliament as the Independence Party.

"I will now talk to the leader of all the parties elected to parliament and only after that will I decide who would be invited for formal coalition talks," Gunnlaugsson said.

Coalitions are usually formed in a matter of days or weeks and Iceland has no precedent for lengthy gridlock.

Iceland was plunged into an acute crisis in a matter of days in late 2008 when its oversized banking sector swiftly collapsed, dragging down the entire economy.

Although an IMF-led package stabilized the economy and Iceland has even returned to modest growth, capital controls remain, real wages are far below their pre-crisis level and household debt remains crippling, as inflation indexed loans keep growing despite previous rounds of relief.

(Reporting by Robert Roberson; writing by Balazs Koranyi; Editing by Jon Boyle)