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REYKJAVIK, Iceland (AP) — A senior figure in Iceland's main governing party said Thursday that she expects early elections to be held this year, as protesters called for the government to step down over the country's severe economic crisis.

Thorgerdur Gunnarsdottir, deputy leader of the center-right Independence Party, told parliament she expected there would be elections this year.

Under Icelandic law, a national election does not need to be called until 2011, and Prime Minister Geir Haarde has insisted he will not resign.

His office had no comment on Gunnarsdottir's remarks.

Demonstrators have mounted a series of increasingly violent protests against Haarde's government, which they blame for leading their once-prosperous island nation of 320,000 people into economic ruin.

Iceland's banks collapsed in last fall under the weight of huge debts amassed during years of rapid economic growth. The country's currency has plummeted, while inflation and unemployment are soaring.

Police used tear gas to break up an angry protest outside Iceland's parliament early Thursday, and two officers were hospitalized after being hit by rocks.

It was the first time the country's police had used tear gas since 1949, when Icelanders protested the country's decision to join NATO.

Demonstrators, banging pots and honking horns, have gathered outside Reykjavik's tiny parliament building since lawmakers returned from their winter break Tuesday

Reykjavik police chief Stefan Eiriksson said about 2,000 protesters surrounded the building late Wednesday, and some hurled fireworks, shoes, toilet paper, rocks and paving stones at the building and its police guard. He said police tried to disperse a hard core of a few hundred protesters with pepper spray before using tear gas early Thursday.

"We had to take action to split up the people and try to avoid further damage and injuries to the police," he said. "This was our last resort."

Witnesses said some demonstrators tried to stop others from throwing rocks at police.

Two police officers were hospitalized. One was released Thursday and the other remained in the hospital in stable condition, Eiriksson said.

There were no arrests.

Demonstrators also surrounded the prime minister's car, pelting it with eggs and soda cans. Haarde's spokesman, Kristjan Kristjansson, said the prime minister was shaken but unhurt.

"The government has been of the opinion that it would be irresponsible to run away from the problems," Kristjansson said. "That position has not changed, but of course protests and opposition do not make things easier"

But the government could fall if the Social Democratic Alliance, partner to Haarde's Independence Party, withdraws its support. At a meeting Wednesday, the party's Reykjavik chapter called on the party to sever its alliance with the Independence Party and trigger elections by May.

Police chief Eiriksson said the protests were expected to continue, and he could not rule out more violence.

"This is a new situation," he said. "But everything is changing in Iceland."

AP Writer Jill Lawless reported from London.