Iceland hits ruling coalition at election polls

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ICELANDERS voted yesterday in a parliamentary election that could return to power the centre-right parties that led the country into economic collapse five years ago.

Polls show the Progressive and Independence parties, who oppose EU membership and are promising to ease economic austerity, leading the Social Democrat-Left-Green coalition that has governed Iceland during four years of crisis and uneven recovery.

“The government that many people thought was cleaning up the mess is getting severely punished for the last four years,” said political analyst Egill Helgason. “I don’t know whether they deserve it. In many ways I think not. But this is politics – cruel.”

Progressive Party chief Sigmundur David Gunnlaugsson and Independence Party leader Bjarni Benediktsson are the two most likely candidates for prime minister under the system of proportional representation used for elections to Iceland’s 63-seat parliament, the Althingi.

The two parties governed Iceland for several decades, often in coalition, overseeing economic liberalisation that spurred a banking and business boom – until Iceland’s economy crashed spectacularly in the 2008 credit crisis.

Despite being widely blamed for the meltdown, the Independents and Progressives say they are best placed to lead the economic recovery.

The Progressives are promising to write off some mortgage debt, taking money from foreign creditors. Benediktsson’s Independence Party is offering lower taxes and the lifting of capital controls.

“We believe we can do a lot for indebted households, but our plan is not to do only that,” said Benediktsson after casting his vote in a Reykjavik suburb.

“I think the only way out of the economic difficulties we’ve had is growing the economy, and we need to create new jobs, start new investments and we have a very strong plan to start doing that tomorrow.”

A volcano-dotted North Atlantic nation with a population of just 320,000, Iceland went from economic wunderkind to financial basket case almost overnight when the credit crunch took hold in 2008.

In the first years of this century, Iceland’s economy experienced a credit-fuelled boom that saw its banking sector grow to nine times annual gross domestic product.

Then all three major commercial banks collapsed within a week of one another in October 2008. The value of the country’s currency plummeted, while inflation and unemployment soared. Iceland was forced to seek bailouts from Europe and the International Monetary Fund.

A wave of protest ended with the government blamed for the crisis being replaced with a left-of-centre alliance led by prime minister Johanna Sigurdardottir.

Full election results are expected today.

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