Iceland to appoint new government

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Iceland's president planned to appoint interim leaders after the coalition government toppled amid an economic crisis and widespread public dissent.

Prime Minister Geir Haarde resigned yesterday and disbanded the government he's led since 2006 following weeks of noisy protests at his handling of the economy.

Iceland's banks collapsed last year with huge debts amassed during years of rapid expansion. Unemployment and inflation have spiraled.

Following talks with the leaders of the county's five main political parties, Iceland's president Olafur Ragnar Grimsson said he today planned to ask one of the groups to lead a minority government until May elections.

Haarde said last week that elections slated for 2011 would be moved up to May. But Haarde said he wouldn't lead his Independence Party into those elections, because he plans to seek treatment for cancer.

Several lawmakers said they expected popular Social Affairs Minister Johanna Sigurdardottir to become interim prime minister. She is a member of the Social Democratic Alliance Party, Haarde's coalition partner until yesterday.

"She is a senior parliamentarian, she is respected and loved by all of Iceland," Environment Minister Thorunn Sveinbjarnardottir, another Alliance party member, told the Associated Press.

Haarde had hoped his fallen government would be replaced by a national unity cabinet composed of members of all five major parties. However, the Alliance party said they would no longer work alongside Haarde's Independence Party.

"The only real possibility is a minority government," said Steingrimur Sigfusson, chairman of the opposition Left-Green movement.

Thousands of angry Icelanders have demonstrated against the ousted government in recent weeks, clattering pots and kitchen utensils in what some commentators called the "Saucepan Revolution."

Though largely peaceful, protesters have doused Reykjavik's parliament building in paint and hurled eggs at Haarde's limousine. Last Thursday, police used tear gas to quell a protest for the first time since 1949.

Haarde's government has come under sharp criticism for not reining in Iceland's banks and leading the once-prosperous nation of 320,000 people into economic ruin.

Iceland's banks collapsed in the fall under the weight of huge debts amassed during years of rapid economic growth. The country's currency has plummeted, while inflation and unemployment are soaring.

Since global credit crunch hit, Haarde has nationalized banks and negotiated about $10 billion in bailout loans from the International Monetary Fund and individual countries.