Icelanders Freeze Out Pro-Business Party

Iceland's leftist coalition was confirmed on Sunday as the winner of the country's general election - a blow for the pro-business Independence Party that many blamed for the collapse of the country's banking system.

Results showed that a left-wing coalition made up of the Social Democratic Alliance and the Left Green Movement won 34 out of the 63 seats in Parliament.

With 97.9 percent of the votes tallied, the Social Democrats won 30.5 percent of the vote, or 20 parliamentary seats, while the Left-Green Movement won 21.5 percent, or 14 seats. Both parties have long said they will form a coalition government. The left-wing coalition is led by interim Prime Minister Johanna Sigurdardottir

The two parties are part of a caretaker government that took office in February after public protests about Iceland's economic collapse toppled the previous conservative administration.

Voter turnout was just over 85 percent - slightly higher than in the 2007 elections.

The results were an overwhelming rejection of the conservative Independence Party, which has held a parliamentary majority for some 70 years.

Although the Independence Party won 23.7 percent of the vote - 16 seats - many have blamed its leaders for the country's economic troubles.

Independence Party leader Bjarni Benediktsson said his party would accept the results of the election and said the losses would "spur the party on."

The global financial crisis washed up hard on the shores of the volcanic island of 320,000 people. After racking up massive debts during years of laissez-faire economic regulation and rapid expansion, Iceland's three main banks collapsed within the space of a week in October.

The government has sought a $10 billion International Monetary Fund-led bailout but the country's currency, the krona, has plummeted.

Unemployment and inflation have spiraled and the IMF has predicted that the economy will shrink by about 10 percent in 2009, which would be Iceland's biggest slump since it won full independence from Denmark in 1944.

"The nation is settling the score with the neoliberalism, with the Independence Party, who have been in power for much too long," Sigurdardottir told supporters late Saturday. "The people are calling for a change of ethics. That is why they have voted for us."

Most of the parties offered vague solutions to tackle Iceland's current financial woes.

The Social Democrats ran on a socialist ticket, promising as many as 6,000 new jobs in the building, tourism, fishing and energy industries. They also called for a constitutional change that would allow for public ownership of natural resources.

The Left Greens promised reductions in foreign debt, interest rates and Iceland's trade deficit.

The biggest issue in the election, however, was membership in the EU - seen by many voters as a magic bullet for Iceland's financial troubles even though membership could take years.

The results represented a strong victory for Iceland's pro-European Social Democratic Alliance.

The Social Democrats, the Progressive Party and the Citizen's Movement want Iceland to apply for EU membership, which would eventually allow the country to adopt the euro.

Although the Social Democrats say they will honor the coalition with the Left Green Movement - traditionally it has been opposed to closer ties with the European Union and wanted a referendum before applying for EU membership - the win gives the Social Democrats more power to push through a pro-EU agenda and puts more pressure on the Left Green Movement to conform.

The Progressive Party won 14 percent of the vote, or 9 seats, while the Citizens' Movement won 7.2 percent, or 4 seats.

"It (the results) gives the Social Democrats a strong position and puts pressure on the Left Green Movement," said political analyst Egill Helgason.

On Sunday Left Green Movement leader Steingrimur Sigfusson made it clear he was willing to work with the Social Democrats as he headed for a meeting with Sigurdardottir at her home.

"It would be quite unconventional if two parties who have had good co-operation which has had no problems were not the first to discuss the formation of government," he said before the meeting.
By Associated Press Writers Herdis Sigurgrimsdottir and Gudjon Helgason