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Iceland's president resists calls to dissolve parliament as calls heighten for PM to quit

Iceland's president has refused a request from the prime minister to dissolve both government and parliament and call a new quick election. Gunnlaugsson could be the first casualty of the "Panama Papers" leaks.

Iceland's Prime Minister Sigmundur David Gunnlaugsson

Iceland's Prime Minister Sigmundur David Gunnlaugsson

After a meeting with

Prime Minister Sigmunder David Gunnlaugsson

Tuesday, President Olafur Ragnar Grimsson said he wanted talks with the main parties before making a decision.

Tuesday's parliamentary session was also cancelled, reportedly to give the coalition partners time to see if the government can be saved.

Thousands of Icelanders protested outside parliament Monday, demanding that Gunlaugsson resign. As many as 10,000 protesters - in a country of 330,000 - were estimated to have gathered for an evening protest in central Reykjavík, chanting, banging drums and barricades, and blowing whistles. Some waved bananas, symbolizing the belief of many that they were living in a banana republic.

Opposition demands government resign

Opposition MPs met Tuesday morning and agreed unanimously on a motion of no confidence in the government. Their statement demanded the dissolution of the current parliament and early general elections. Elections are not scheduled until next year.

People demonstrate against Iceland's Prime Minister Sigmundur Gunnlaugsson in Reykjavik on April 4

People demonstrate against Iceland's Prime Minister Sigmundur Gunnlaugsson in Reykjavik on April 4

With poor opinion poll showings both the Independence Party and Gunnlaugsson's Progressive Party are in no rush to go to the polls.

"I have not considered quitting because of this matter nor am I going to quit because of this matter,” Gunlaugsson told Icelandic television. “The government has had good results. Progress has been strong and it is important that the government can finish its work.”

The coalition between Gunnlaugsson's Progressive Party and the Independence party of the finance minister, Bjarni Benediktsson (whose name also appears in the Panama Papers), holds 38 of the 63 seats in parliament, although there were reportedly signs late Monday that Gunnlaugsson might not be able to count on the automatic support of his coalition partners.

The last parliamentary elections took place in April 2013, which resulted in a majority left-wing government. The Progressive Party was the largest party after the election and formed a coalition with the Independence Party.

Panama Papers at it again

The so-called

Panama Papers

leaks showed possible links to an offshore company that could represent a serious conflict of interest.

The papers reportedly show that Gunnlaugsson and his wife, Anna Sigurlaug Palsdottir, bought a British Virgin Islands-based company from Mossack Fonseca, the Panamanian law firm at the centre of the leak, in 2007 in order to invest money from the sale of Palsdottir's share of her family's business.

Gunnlaugsson reportedly sold his 50% of the company to Palsdottir for $1 at the end of 2009, soon after he was elected as an MP for the first time and has never declared an interest in the company. The prime minister's office says his shareholding was an error due to the couple having a joint bank account.

A conflict of interest

Since becoming prime minister in 2013 Gunnlaugsson has overseen negotiations with creditors of the three big Icelandic banks that collapsed during the 2008 crisis. The leaked documents show that his wife's offshore company - Wintris - which lost 515m kronur (3 million euros) in the crash, was owed a big sum from their bankruptcies.

Gunlaugsson has denied any wrongdoing. He has said the assets were not "hidden in a tax haven" but were fully declared and taxed in Iceland, and insisted he and his two-party centre-right coalition government had "always put the interest of the public before his own in dealing with the financial claims."

Demonstrations against Iceland's Prime Minister Sigmundur Gunnlaugsson in Reykjavik on April 4

Demonstrations against Iceland's Prime Minister Sigmundur Gunnlaugsson in Reykjavik on April 4

The office of the president of Iceland is not a political one. The constitution states that the president has the authority to dissolve parliament and call for new elections. An Icelandish news source said for this to happen he would need to receive a proposal to that effect from the prime minister.

jbh/jil (AP, Reuters, dpa)