Iceland's government collapses after financial crisis

Iceland's government has collapsed in the wake of the financial crisis, the country's prime minister Geir Haarde said today.

Speaking at Parliament, and having already accepted the resignation of the commerce minister, Haarde said his coalition government had fallen apart and he was resigning as a result, news sources reported.

'I really regret that we could not continue with this coalition. I believe that would have been the best result,' he reportedly said at parliament.

On Friday Haarde had said that he would not seek re-election as leader of the Independence Party at its upcoming national congress after a medical examination revealed he had a tumour in his throat.

He said elections to decide on a new leader would be held by his party in March, ahead of national elections which would be held on Saturday, 9 May.

But today, amid a series of protests from angry citizens furious that their country is in dire straits, Haarde said he would formally dissolve the government.

After the collapse of the country's leading financial institutions, the currency has tanked and unemployment has jumped, with the BBC reporting that Iceland's economy is forecast to shrink by a staggering 9.6% this year.

The coalition government, formed between his Independence Party and the Social Democratic Alliance, has been under fire since the global financial crisis hit Iceland in October.

Landsbanki, along with Iceland’s other main banks, collapsed as a result of the crisis and had to be rescued by the government, with Landsbanki itself now being run by the Icelandic Financial Services Authority.

It was one of many institutions crippled by the financial crisis, and Iceland itself had to be bailed out soon after, getting a loan from the International Monetary Fund (IMF), amounting to $2.1 billion.