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WORLD> Europe
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New Iceland government promises to fight crisis
(Agencies)
Updated: 2009-02-02 10:27 REYKJAVIK – Iceland named an interim center-left government on Sunday which promised to rebuild its shattered economy while cushioning its people from the worst of the crisis.
Johanna Sigurdardottir of the Social Democratic Alliance will become Iceland's new prime minister after center-right Geir Haarde stepped down last week following months of protests, the first leader to become a casualty of the global economic crisis. The government asked a parliamentary committee to consider if Iceland should join the European Union, but said coalition parties would not allow the fiercely independent island nation to do so without a referendum. "This government's primary objective will be responsible fiscal control," said Sigurdardottir, Iceland's first female prime minister and the world's first openly gay leader. "First and foremost, we will focus on urgent matters regarding the businesses and homes of this country," Sigurdardottir, 66, told a news conference. Analysts said the government -- in office only until an election due on April 25 -- would have little room for maneuver in tackling the crisis which hit Iceland when its banks and currency collapsed in the credit crunch. "They start with good wishes from everyone, but they do not get any honeymoon because the time is so short and the problems are so big," said Olafur Isleifsson, assistant professor of economics at the University of Reykjavik. But it might help assuage public anger from people facing real hardship after the collapse, which forced Iceland to take a $10 billion International Monetary Fund-led rescue package. "The major change is maybe that now you have a government that the Icelandic people will be inclined to trust," said Birgir Gudmundsson, a professor at the University of Akureyri. The coalition of the Social Democratic Alliance and the Left-Green Party said it would stick to the program agreed with the IMF but concentrate on finding ways to rapidly cut interest rates currently at 18 percent. It will have to negotiate the pace of monetary easing with the IMF. With Left-Green leader Steingrimur Sigfusson as the new finance minister, the government said in a statement it would set up a monetary policy commission to take decisions on interest rates, bank reserves and cash requirements. CENTRAL BANK BOSSES TO BE REMOVED It also pledged to take quick action to remove central bank bosses, after the bank and its Governor David Oddsson, a former long-ruling prime minister for Haarde's Independence Party, became a focus of anger for protesters. The nation's banks would come under pressure from the coalition to restart lending, while homeowners left struggling with foreign currency loans made more expensive by the collapse of the Icelandic currency would be given support. In a bid to boost employment and business, the coalition said it would also plan a series of public works. The minority government will have the support of the centrist Progressive Party in the 63-seat parliament. While this government will not decide if Iceland should begin EU entry-talks, the coalition said it would start changing the law to allow it to hold referendums on the issue in future. A parliament committee would deliver a report by April 15 looking at all questions related to the EU including whether or not to seek to join the euro. "The parties forming the government agree that membership of the European Union will never be decided upon without a national referendum," the government statement said. EU membership is expected to be debated in the election. "I would think that before the election, every party has to answer the question of how they are going to build Iceland again: is the EU the way or not?" said University of Iceland political science research assistant Einar Mar Thorvarsson. Sigurdardottir acted as welfare minister in the previous government. While she will rank as Iceland's first female prime minister, the country has had a woman president. |
