Amidst economic gloom Iceland looks to uncertain future as government collapses

After days of uncertainty amid rising public disaffection, Iceland's coalition government collapsed on Monday, plunging the island nation into political turmoil. The Icelandic economy has been tottering since October sparking social unrest and widespread disillusionment with the economic system that has left the population facing dire economic hardship (See: Iceland headed for bankruptcy; PM seeks $5.44-billion Russian loan). 

The value of the country's currency, the krona, has plunged, leaving many Icelanders who had taken out special loans denoted in foreign currencies in deep debt. Iceland has also to make billions of dollars in repayments to Europeans who held accounts with subsidiaries of collapsed Icelandic banks (See: Iceland's Kaupthing Bank to sue UK government)  

Prime Minister Geir Haarde, leader of he Independence party resigned, dissolving the government he had led since 2006. He rejected demands of the Social Democrats, coalition partners who wanted to see a new prime minister installed in exchange for keeping the coalition going.

Haarde's government had nationalised banks and negotiated loans totaling about $10 billion from the International Monetary Fund and individual countries (See: Iceland to get $6 billion from IMF, Europe).

Haarde, who is suffering from cancer, has announced he would not be seeking another term.

He called early elections last week in the wake of growing protests, rising unemployment and soaring prices.