(Reuters) - Iceland's Prime Minister Geir Haarde said on Monday his coalition government had fallen apart under the pressures of the financial crisis and he would hand in his resignation to the president.
Foreign Minister Ingibjorg Gisladottir, the Social Democrat leader who had been considered a potential replacement for Haarde, announced she would not seek to be prime minister.
Pressure was high with demonstrations against the government and the central bank becoming regular fixtures in the capital Reykjavik since the currency plunged and the financial system collapsed.
Here are some facts about Iceland and its economy:
THE ECONOMY:
-- Iceland's Finance Ministry said last week that it saw real GDP falling 9.6 percent in 2009 and remaining largely unchanged in 2010 compared with its October forecast of down 1.6 percent in 2009 and growth of 1.1 percent next year.
-- It also saw inflation for 2009 at 13.1 percent, compared to its October forecast of 5.7 percent. For 2010, it saw inflation coming down to 2.7 percent to put it in line with the central bank's target.
-- The government said it expected the current account deficit, currently an estimated 22 percent of GDP, to reverse to a 6.1 percent surplus this year and to 5.6 percent in 2010. Unemployment was seen rising to an average of 7.8 percent in 2009 and rising even further in 2010, to 8.6 percent.
-- Prime Minister Haarde had warned of "national bankruptcy" and said at the end of last year that the financial crisis which ravaged the banking system and the crown currency underscored the pitfalls of managing a currency in a small, open economy. Continued...
The coalition government in Iceland has collapsed following the international banking crisis.

Icelandic Prime Minister Geir Haarde 

Prime Minister Geir Haarde of the conservative Independence Party had begun talks with coalition partner party Social Democratic Alliance in the run-up to an early general election planned for May. It was reported yesterday that these talks had failed and the coalition was dissolved. The centre-left Social Democrats will now try to build a coalition with opposition parties, according to the BBC.

The Independence Party currently has 25 of the 63 seats in the country's unicameral Althing (parliament), and the Social Democratic Alliance holds 18 seats. The remainder of the government consists of the Left-Green Movement (9 seats), the Progressive Party (7) and the Liberal Party (4).

The coalition was formed after the election in 2007, but became uneasy after the global financial crisis caused Iceland to nationalise its banking system and ask for help from the International Monetary Fund, with Social Democrats seeking closer ties with the European Union and the replacement of the head of the central bank. Social Democrat leader and Foreign Minister Ingibjörg Gísladóttir has suggested Jóhanna Sigurðardóttir, the Social Affairs and Social Security Minister, as the next prime minister.

Iceland's interest rate is now 18%, with GDP expected to fall 9.6% this year. Inflation has reached 13.1%.