Centre-right opposition wins Iceland election

Iceland's centre-right opposition stormed back to power, final election results showed on Sunday, marking a spectacular comeback for a coalition ousted in 2009 after presiding over the country's near bankruptcy.

Voters from the small North Atlantic nation, fatigued after four years of austerity imposed by a leftist government, handed power to the right-wing Independence Party and the centrist-agrarian Progressive Party, results showed.

A final count of nearly 194,000 valid votes cast showed the Independence party won the popular vote with 26.7 percent, giving it 19 seats in parliament.

"We are ready to lead the government," the party's 43-year-old leader, Bjarni Benediktsson, said in a televised debate, adding his was the party "with the most votes."

Benediktsson was expected to seek a government with the support of the Progressive Party, which got 24.4 percent of the vote and also 19 legislative seats.

But leftist rivals claimed the leader of the resurgent Progressive Party was more likely to be tasked with forming a government.

"The president will talk to each leader, that is the custom. A lot of things point to the Progressive Party getting the first opportunity," said Social Democratic Alliance leader Arni Pall Arnason.

The Progressive Party leader himself, Sigmundur David Gunnlaugsson, would only say it was "up to the president to decide" who would form a government.

Negotiations to form a coalition could last several days.

The centrist party was punished at the polls in 2009 for its role in the financial deregulation that preceded the collapse of Iceland's banking system.

But support soared after a European court ruling this year vindicated the party's refusal to reimburse British and Dutch savers at failed online bank Icesave.

The opposition victory could also spell the end of EU membership negotiations, as both parties are in favour of halting Iceland's bid.

But that issue took a backseat to Icelanders' falling spending power and sliding living standards.

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 offered debt-laden voters tax credits.

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

The government in power since 2009 suffered a heavy defeat, with the centre-left Alliance Party winning just 12.9 percent of votes, or nine seats -- less than half as many as in 2009.

Its ally, the Left-Green Movement, ended up with 10.9 percent of the vote and seven seats.

President Olafur Ragnar Grimsson said on Sunday he had met outgoing Prime Minister Johanna Sigurdardottir to accept her resignation.

"I have decided to start talks tomorrow with the chairmen of all parties," he said.

"It is evident in the light of our experience in the last four years that for a government to be successful and strong, it not only needs support in parliament but also in society," he added.

Voter discontent has spawned an unprecedented number of political parties, and two new parties entered parliament, including the Pirate Party, an online activist group advocating file sharing.

With 5.1 percent of the vote and three seats, it has become the first party of its kind to enter a national parliament, a "historic" result, according to co-founder Birgitta Jonsdottir.

The other newcomer was the pro-EU Bright Future party, which won 8.2 percent of the vote and six seats.

"If you look closely at the results it's a rebellion of the rural areas against these people in Reykjavik who wanted to tax them and who were supported by left-wing intellectuals," said Hannes Holmsteinn Gissurarsson, a political scientist from the University of Iceland.

The election was largely seen as a protest vote, and few members of the electorate had anything positive to say about their politicians as they left the polling booths on election day Saturday.

"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.

Despite widespread signs of popular frustration with politics, voter turn-out was 83.3 percent, down only slightly from 85.1 percent four years ago.