Household woes overshadow EU talks in Iceland election

Iceland's centre-right opposition was seen winning Saturday's election after offering homeowners debt relief on ballooning mortgages, but there was little enthusiasm outside polling stations in what was largely seen as a protest vote.

The right-wing Independence Party and the centrist-agrarian Progressive Party, who both want to end the northern Atlantic nation's EU accession talks, are expected to form a new coalition.

The two parties have staged a remarkable comeback since being punished in the 2009 election for financial woes hitting the small island nation of 320,000 people.

"We believe we can do a lot for indebted households," said Bjarni Benediktsson, the 43-year-old Independence Party leader, as he cast his ballot in Reykjavik.

Before the crisis, the mortgages offered by Icelandic banks were linked to inflation, resulting in spiralling borrowing costs for homeowners when the krona collapsed against other currencies.

After four years of tax hikes and austerity designed to meet international lenders' demands, the Independence Party has offered debt-laden voters tax credits.

The Progressive Party wants to go even further by asking banks to write off some of the debt.

The party's leader Sigmundur David Gunnlaugsson, 38 -- also a candidate for the prime minister post -- wrote on Facebook that "the homes have waited for justice for more than four years."

The biggest party traditionally picks the prime minister but polls in the final weeks of campaigning have put the two parties neck-and-neck, and social democratic Prime Minister Johanna Sigurdardottir, 70, has said she is retiring.

Skies were overcast in Reykjavik on Saturday as voters went to the polls, where few had anything positive to say about their politicians.

"The government was no good. They were elected for us, the people, and they didn't do anything for the nation," said Thordur Oskarsson, 73.

Another voter, 49-year-old Anna Katrin Kristiansdottir, noted that "everything was in ruins" when the leftist government took office, and accused voters of having a short memory.

"That's why the Independence Party and the Progressive Party, which led us to the disaster, are coming back already," she said.

An opposition victory could spell the end of Reykjavik's EU membership negotiations, as both the Progressive Party and the Independence Party are in favour of putting a halt to Iceland's bid.

But the issue has taken a backseat to Icelanders' falling spending power and sliding living standards.

"I think there is a broader lesson from Iceland in that if the goal is to preserve living standards, reduce unemployment and so on, then following a policy of strict austerity is not the way to go," said Kolbein Stefansson, a sociology lecturer at the University of Iceland.

The social democratic-led government had been "quite successful in restoring the economy", but failed to make that point to the electorate, he argued.

"I think a lot of people feel that the government has been representing the system more than the interests of the families and people in Iceland," he said.

Voter discontent has spawned an unprecedented number of political parties. One of them, the online file-sharing activist movement Pirate Party, could be the first of its kind elected to a national parliament.

The party has pledged to spend literally nothing on its campaign, but is the third biggest party on Facebook by number of "likes" received.

A Gallup poll conducted between April 18 and 25 suggested the Independence Party would win 27.9 percent of votes while the Progressives would garner 24.7 percent.

Polls close at 22:00 GMT, when the first estimates of the outcome are expected. The final results will be announced early Sunday morning.