Protesters demand Iceland government quits now

By Kim McLaughlin

Thousands of protesters called on Saturday for Iceland's government to step down immediately, dismissing the prime minister's promise to resign and call an early election.

Prime Minister Geir Haarde, sick with cancer, said on Friday he would quit under the cloud of the country's economic collapse and called for a May 9 election.

Police estimated as many as 6,000 demonstrators stood on the square outside Iceland's Althing parliament, some carrying signs demanding "a new democracy."

It was the fifth straight day of protests, and the demonstration was a big as any since regular Saturday protests started in October.

Haarde voiced "contempt" on Saturday for some of the actions by banks that triggered the country's financial crisis.

Iceland, one of the richest countries in the world per capita in 2007, plunged into crisis in October when it fell victim to the global credit crunch. Its currency collapsed as its financial system imploded and unemployment in the island nation of 320,000 is surging.

"How is it possible to sit at home and not protest against the complete misuse of power we have had to suffer as a nation?" teacher Sigrun Bragadottir told Reuters.

"The rampant greed was completely out of control and the corruption overwhelming. I want someone to at least apologise and take some responsibility."

SHIFT TO THE LEFT

Haarde shocked the island nation on Friday when he said he would not seek re-election and called for a vote on May 9. Opinion polls predict a sharp shift to the left at elections.

Haarde told national radio on Saturday he had not stepped down because of the plunging popularity of his coalition and said he hoped to run the government until the elections, despite his health problems. He said he was going abroad, probably to the Netherlands, for surgery to treat a malignant tumour of the oesophagus.

He also commented for the first time on media reports of wrongdoing in Iceland's banks in the run-up to last year's crisis, when all major banks were nationalised after collapsing under the weight of billions of dollars of foreign debt.

"I would like to use this opportunity to state my disbelief and contempt for some of the things that have been coming into the daylight in regards to the banks," he said, but declined to comment on whether the actions of the banks had been criminal.

To stay afloat last year, Iceland negotiated a $10 billion aid package crafted by the International Monetary Fund and effectively froze trade in its currency.

Polls show that Haarde's Independence Party, which has run Iceland in coalitions for more than 17 years, will likely be the big loser in an election and that there has been a strong shift in favour of the opposition Left-Green and Progressive parties.

Protests turned violent in the early hours of Thursday, with demonstrators pressing for Haarde, the central bank governor and other senior officials to go. Police used teargas for the first time since 1949 against demonstrators.

Saturday's demonstration was peaceful but student Astridur Halldorsdottir said she wanted a new government, with new parties and new people.

"No more banana republic here. I think it is ridiculous how little information we get about what is being done do improve the situation," she said, carrying a big sign with an Icelandic flag and the word "Sale."

Haarde and Social Democrat Foreign Minister Ingibjorg Gisladottir, head of the junior party in the ruling coalition, were set to discuss the election date over the weekend.

(Additional reporting by Kristin Arna Bragadottir and Omar R. Valdimarsson; Editing by Dominic Evans)

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