5 years after economic meltdown, Icelanders likely to turn right in national election

REYKJAVIK, Iceland – Icelanders were voting Saturday in a parliamentary election that could return to power the center-right parties that led the country into economic collapse five years ago — and stall plans to join the European Union.

Polls show the Progressive and Independence parties, who oppose EU membership, leading the Social Democrat-Left-Green coalition that has governed Iceland during four years of crisis and uneven recovery.

"The government that many people thought was cleaning up the mess is getting severely punished for the last four years," said political analyst Egill Helgason. "I don't know whether they deserve it. In many ways I think not. But this is politics — cruel."

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 the credit crunch took hold in 2008.

In the first years of this century — under a coalition of the Independence and Progressive parties — Iceland's economy experienced a credit-fueled boom that saw its banking sector grow to nine times annual gross domestic product.

Then all three major commercial banks collapsed within a week of one another in October 2008. 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.

A wave of protest — dubbed the Saucepan Revolution after the pots and pans banged by demonstrators — ended with the government blamed for the crisis replaced with a left-of-center alliance led by Prime Minister Johanna Sigurdardottir, which opened EU membership talks.

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 those value soared after the crash — in the years of easy credit.

Both the Progressive and Independence parties are appealing to voters with promises to ease austerity. Progressive Party chief Sigmundur David Gunnlaugsson is promising to write off some mortgage debt, taking money from foreign creditors.

Independence Party leader Bjarni Benediktsson is offering lower taxes and the lifting of capital controls.

The two are the most likely candidates for prime minister under the system of proportional representation used for elections to Iceland's 63-seat parliament, the Althingi.

Polls close at 2200GMT (6 p.m. EDT), with results expected early Sunday.