Iceland set for change of government as polls close in snap election

By Louise Rasmussen, Isabelle Yr Carlsson and Jacob Gronholt-Pedersen

Iceland's centre-left Social Democrats looked on course to win the most votes when polls closed in a snap election on Saturday, suggesting the political landscape was likely to be shaken up, although a snowstorm could still delay tallying of ballots.

The North Atlantic island nation, home to 384,000 people, has enjoyed relative political stability since 2017 and ranks among the wealthiest countries in Europe per capita, bolstered by tourism, fisheries, and cheap geothermal- and hydroelectric-powered aluminium production.

However, inflation and borrowing costs that are near their highest level since the 2008 financial crisis have helped spark an economic slowdown, propelling growing hardship to the forefront of voters' concerns.

A series of volcanic eruptions near the capital Reykjavik, causing displacement of thousands of people and costly infrastructure repairs, have also dampened tourism.

Polls closed at 2200 GMT in all six constituencies despite a snowstorm in the northern and eastern part of the country, which could still delay the final result early on Sunday, according to public broadcaster RUV.

Opinion polls ahead of the election had indicated that the ruling coalition of the Left-Green Movement, the conservative Independence Party, and the centre-right Progressive Party, in power for the last seven years, was likely to be unseated.

However, the Independence Party led by Prime Minister Bjarni Benediktsson placed second after polls closed with just over 18% of votes according to preliminary results, benefiting from a late surge in support.

It was very closely followed by the centre-right Liberal Reform Party with just under 18%, according to RUV.

The centre-left Social Democratic Alliance, which was last in government between 2009 and 2013, stood to come in first by taking over 20% of votes cast.

"We've had the same coalition for seven years, and there seems to be a desire now for new people in government," Stefania Oskarsdottir, a political scientist at the University of Iceland, said in an interview on Monday.

Katrin Jakobsdottir of the Left-Green Movement resigned as prime minister in April to run for the presidency, a bid she lost. Her replacement, Bjarni Benediktsson, dissolved parliament in October and called an election following escalating coalition disagreements and public discontent over migration and energy and housing issues.

Iceland's population has surged by 20% over the past decade, the most significant increase among OECD nations, fueled by high immigration rates, further pressuring housing and healthcare.

While inflation and interest rates have recently started to decline, the cost of living crisis has reignited the question of EU membership in election debates. Polls suggest the pro-EU Social Democrats and the Liberal Reform Party combined would garner 40% of votes.

"The biggest issue here right now is cost of living," Social Democratic leader Kristrun Frostadottir told Reuters in an interview on Wednesday.

The 36-year-old economist, who took over as party leader two years ago, is a champion of the Nordic welfare model and a favourite to become the new prime minister.