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Iceland commerce minister quits amid meltdown

(Agencies)
Updated: 2009-01-26 14:58

REYKJAVIK, Iceland -- Iceland's commerce minister quit Sunday citing the pressures of the nation's economic collapse, as the country's political leaders failed to agree on how to lead country out of its financial crisis.

People gather at protest in Reykjavik January 25, 2009. Iceland's Minister of Commerce quit on Sunday, calling into question the government's ability to rule until an early election in May and tackle the country's economic collapse. Commerce Minister Bjorgvin Sigurdsson said he was resigning because of his role in the collapse that has prompted protesters to call for the government's immediate resignation. [Agencies]

Bjorgvin Sigurdsson told reporters he had resigned and had also fired the head of the Iceland's financial supervisory authority. He acknowledged that Icelanders have lost faith in their government and political system.

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"I want to shoulder my part of the responsibility for that," he said.

Prime Minister Geir Haarde and Ingibjorg Gisladottir, the head of the Social Democratic Alliance, his coalition partner, held emergency talks to discuss whether Iceland's government can continue to hold office, but failed to reach any agreement.

"I hope the government will survive, but that will become clear tomorrow. Other possibilities would be worse, such as a national government of all parties," Haarde told reporters Sunday, speaking in Icelandic.

On Friday, Haarde called national elections for May and announced he would not run for re-election.

Kristjansson said the leaders had failed to agree whether the coalition government will continue until May. Gisladottir's party could seek to oust Haarde's Independence Party and sit as a minority government with two leading opposition parties.

"The government is not dead, but both party leaders have said publicly that it hangs in the balance," Kristjansson said, following the talks.

He said discussion are likely to continue on Monday. "Both leaders agree that they haven't got many hours now to solve this," Kristjansson said.

Gisladottir's party wants Haarde to replace the governor of Iceland's Central Bank, David Oddsson, a former prime minister, a step the current leader has so far refused to take.

Haarde told reporters he is considering combining the central bank with the country's banking industry regulator, the Financial Services Authority.

On Saturday, about 6,000 demonstrators gathered for a rally outside the country's Parliament building, calling on Oddsson to quit.

The call for a May 9 election followed daily protests against the government's handling of an economic crisis triggered by the collapse of the country's banks under the weight of debts amassed during years of rapid expansion.

Inflation and unemployment have soared, and the krona currency has plummeted.

Haarde's government has nationalized banks and negotiated about $10 billion in loans from the IMF and individual countries. But the country faces a bill likely to run to billions of dollars to repay thousands of Europeans who held accounts with subsidiaries of collapsed Icelandic banks.

Haarde said Friday he won't lead the Independence Party into the new elections because doctors had found a malignant tumor in his throat.

He said Saturday he would travel to The Netherlands soon for treatment. Education minister Thorgerdur Katrin Gunnarsdottir will serve as prime minister in his absence.

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