Icelandic caretaker government wins general election

Iceland stepped into terra incognito today, veering left for the first time to hand a parliamentary majority to social democrats, socialists and greens and humiliating the rightwingers who have dominated for generations.

Venting their fury at a government that presided over Iceland's transformation from one of the world's wealthiest countries into the biggest victim of the global financial meltdown, voters in an early election gave strongest support to the social democrats, who are pushing for Iceland to enter the European Union.

With 30% of the vote for the 63-seat Althingi or parliament, the Social Democrats emerged as comfortable winners under Johanna Sigurdardottir, the 66-year-old lesbian caretaker prime minister. The Left-Greens, an alliance of old-style socialists and younger environmentalists never previously voted into power, got 21.5% of the vote.

The leftwing coalition is assured of a three-seat majority and will need to embark on an austerity drive, swingeing spending cuts, and probably tax rises for the rich to try to rescue an economy that came crashing down last October when the three main banks collapsed and the country teetered on the edge of bankruptcy.

Unemployment, inflation, and mortgage repayments are soaring as a result of the crash, which has saddled Iceland with levels of debt running to tens of thousands for each of the population of 320,000 and necessitating a 10bn-dollar bailout programme led by the International Monetary Fund.

Public bitterness at the sudden collapse of a quality of life that was among the highest in the world fuelled fears that voters would stay at home on Saturday in protest at the entire political system. "I don't care who's in charge, right or left. If things don't work out, we'll be back on the streets," said Hordur Torfason, a leader of the January protests that brought down the previous centre-right government. But turnout, at 85%, was higher than in 2007's election.

The result leaves the country run by a former air stewardess and a former lorry driver - Sigurdardottir and the Left-Greens' leader, Steingrimur Sigfusson, who is expected to be finance minister. Both have been heading an interim government since February.

"People are calling for a change of ethics," said Sigurdardottir. "The nation is settling scores with the neoliberalism, with the Independence party, who have been in power for much too long."

The rightwing and anti-EU Independence party has been in power for 18 years and has dominated Icelandic politics for 70 years. Its vote fell to 23% - its lowest tally ever - taking 16 seats as opposed to 25 two years ago.

The sweeping victory was a rare piece of good news for the centre-left across Europe, which has largely failed to capitalise on the economic turmoil to make electoral gains.

Sigurdardottir promptly claimed the poll triumph as a mandate for negotiating entry to the EU - a central campaign pledge. Brussels would welcome Iceland's application and the country could join quickly since it already applies about 75% of EU law. However, Sigurdardottir's junior coalition partner is anti-EU and coming up with a coherent joint policy on the issue will be a key test of the coalition.

For decades, Iceland has staunchly rebuffed talk of joining the EU, fearful of handing control of its vital fishing sector to the European Commission, which sets member states' catch quotas. But Brussels admitted last week that decades of fisheries policy had resulted in failure and pledged to devise a new system.