Iceland's centre-left to form new government

It will lead the country until early elections expected to take place in May.

Ingibjorg Gisladottir, the Social Democrat party leader and outgoing foreign minister, has expressed hopes coalition talks could be completed before the weekend.

For his part, Steingrimmur Sigfusson, leader of the Left Green Party, said: "We have been given this job, and we'll do our best in a difficult situation."

Iceland has been facing serious economic troubles since it was hit by the global crisis in October.

The collapse of the country's financial system led to a currency crunch, ever rising unemployment and eventually to daily protests that made the government step down.

"It's safe to say that no government in the history of Iceland has had to deal with as many and as complex problems as the one that is now leaving office," President Grimsson said after the fall of former premier Geir Haarde's government.

One of the first moves of the Social Democrats is expected to be the replacement of the current central bank governor blamed by many for Iceland's economic troubles.

"In discussions and deliberations with leaders of the parties which will form the new government in a few days, it is absolutely clear that one of the pillars of the new programme will be a change in the leadership of the central bank," Mr Grimsson told the BBC.

Meanwhile, figures show Iceland's economic turmoil is far from over, and consumer confidence this month has plunged to its lowest level since measurements began in 2001. It has fallen 23 percent compared to the prior month and 83 percent compared to its level a year earlier, Reuters reports.

The change in government could also relaunch a debate about Iceland's place in Europe. The outgoing government and the conservative Independence Party had long opposed EU membership.

The Left Greens also remain rather sceptical, but the Social Democrats favour EU membership and reportedly want to hold a referendum on the issue.