Iceland gov't collapses as economy reels

REYKJAVIK, Iceland, Jan. 26 (UPI) -- Iceland's ruling government coalition resigned Monday amid criticism of its handling of a devastating financial crisis, observers said.

Prime Minister Geir Haarde told reporters he would ask President Olafur Ragnar Grimsson to dissolve the government as Iceland's economy reeled from the fallout of the global financial crisis, the Voice of America reported.

Haarde last week called early national elections in May, saying he would not run because he is suffering from cancer. Questions immediately swirled as to whether the ruling coalition would last that long, and another blow was delivered during the weekend when Business Minister Bjorgvin Sigurdsson quit.

Sigurdsson stepped down citing his own role in Iceland's economic collapse and regular street demonstrations demanding that the government resign immediately, VOA said.

Aggressive lending by Icelandic banks made them especially vulnerable to the global financial meltdown, forcing the government last year to take control of three of them. The country needed to secure billions of dollars in assistance from the International Monetary Fund to avert the total collapse of its economy, the VOA reported.