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TheStreet Open House

Iceland Returns Center-Right to Power

By Jenna Gottlieb and Jill Lawless

REYKJAVIK, Iceland -- In a dramatic about-face, Icelandic voters have returned to power the center-right parties that led the national economy to collapse five years ago.

With all votes counted Sunday, the conservative Independence Party and rural-based Progressive Party -- who governed Iceland for decades before the 2008 crash -- each had 19 seats in Iceland's 63-seat parliament, the Althingi.

The parties, who are promising to ease Icelanders' economic pain with tax cuts and debt relief, took 51% of the vote between them, and are likely to form a coalition government.

Voters shunned the Social Democrat-led coalition that has spent four years trying to turn the country around with painful austerity measures. The Social Democrats took nine seats and their former coalition partners the Left-Greens seven.

The pro-Europe Bright Future party took six seats and online freedom advocates the Pirate Party three.

"We are very happy, we are very grateful for the support that we see in the numbers," said Independence Party leader Bjarni Benediktsson.

Either 43-year-old Beneditksson or Progressive Party chief Sigmundur David Gunnlaugsson, 38, is likely to be Iceland's next prime minister.

The shift to the right following Saturday's parliamentary election will almost certainly shelve Iceland's plans to join the European Union, with which it has begun accession talks. Both the Progressives and Independents oppose joining the 27-nation bloc.

The two parties governed Iceland for several decades, often in coalition, overseeing economic liberalization that spurred a banking and business boom -- until Iceland's economy crashed spectacularly during the 2008 credit crisis.

A volcano-dotted North Atlantic nation with a population of just 320,000, Iceland went from economic wunderkind to financial basket case almost overnight when its main commercial banks collapsed within a week of one another.

The value of the country's currency plummeted, while inflation and unemployment soared. Iceland was forced to seek bailouts from Europe and the International Monetary Fund.

Since then, Iceland has in many ways made a strong recovery. Unemployment has fallen and the economy is growing.

But inflation remains naggingly high, and many Icelanders still struggle to repay home and car loans they took out -- often in foreign currencies whose value soared after the crash -- in the years of easy credit.

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