Geir Haarde becomes new PM

Former Progressive Party chairman Finnur Ingolfsson has been rumoured to be considering taking the position of party chairman, "but these are only rumours," said Olafsson.

When asked if Iceland's economic situation influenced the PM's decision, Olafsson said, "I don't believe so, no. He's been in the business for over 30 years, and the local elections weren't as good as he'd hoped they would be, so he felt the time had come to step aside; that the party needed a fresh approach. He never mentioned economics."

Olafur Th. Hardarson, a professor of political science at the University of Iceland, said that he felt Iceland's economic situation had "no influence whatsoever" on Asgrimsson's decision to resign.

"He's been a long time in politics, but the Progressive Party has been obtaining some very low results over the last two years. Of course, the possibility of economic troubles in the next few months might have contributed to his decision, but there is no doubt that the low support numbers are the major reason."

According to the latest results of an ongoing Gallup poll, the Progressive Party would lose over half of its dozen seats if parliamentary elections were held today. In the local elections, the party obtained the support of only 11% of the country, as opposed 17% during the last municipal elections five years ago. An ongoing poll from Gallup shows that the percentage of Icelanders happy with his performance has dropped from 32% to 27% since he took the post in September of 2004, making him the third least popular minister in the Icelandic government.

The Independence Party, by contrast, leads the majority coalitions of all but six of the 37 largest municipalities in Iceland, including Reykjavik.