REYKJAVIK (AFP) -- Iceland’s interim leftist government won a resounding victory in this weekend’s general election as voters punished the conservative party they blame for the country’s economic meltdown seven months ago.

The conservative Independence Party, in power for 18 years until it resigned in January amid massive protests over the financial crisis that brought Iceland to the brink of bankruptcy, looked set to post its worst-ever election score.
“We lost this time but we will win again later,” party leader Bjarni Benediktsson said, conceding defeat as his party took just 24 percent of votes, far below its previous all-time low of 27 percent from 1987.
The pro-EU Social Democratic Party, headed by Prime Minister Johanna Sigurdardottir, was credited with 30.9 percent of votes, and its junior coalition partner, the Left Green Movement, was seen taking 21.5 percent, with 76.4 percent of ballots counted.
Those numbers would give the coalition an absolute majority of 52.4 percent, a first for a left-wing government.
The Independence Party was in power in the early 1990s when the financial markets were deregulated, and has been held accountable for the current crisis that has seen thousands of people lose their jobs and their savings.
Benediktsson said he had heard the message from voters loud and clear.
“It has been clear that we have lost trust and we are just beginning to gain that back,” he said.
Iceland was one of the most prosperous countries in the world until late last year, when the global financial crisis led to the collapse of its oversized financial sector and had a devastating impact.
The state had to take control of the country’s three major banks in October, as the local currency, the Icelandic krona, lost 44 percent of its value.
Unemployment, which was virtually non-existent before the crisis, is expected to hit 10 percent by the end of this year as the economy shrinks by 10 percent, and inflation is currently hovering around 15 percent.
The country received a 2.1-billion-dollar (1.58-billion-euro) bailout from the International Monetary Fund in November, and some early signs of a recovery have been observed.
Sigurdardottir is a fierce advocate of joining the European Union quickly and adopting the euro, arguing that doing so would shelter the Nordic island nation of 320,000 people from global turbulence.
“If we apply immediately for EU membership we will be able to adopt the euro within four years,” she said Saturday before polls closed, adding that Iceland “already meets 70 to 75 percent of EU criteria.”
As the election results came in, she said: “This is a clear message that people want us to start thinking about the EU.”
Yet her coalition partners, the Left Greens, are opposed to EU membership.
They have nonetheless insisted on the need for a debate on the issue which deeply divides Iceland amid fears that Brussels will interfere with its large fishing industry.
The fishing sector -- accounting for 36.6 percent of exports in 2008, second only to the aluminum industry -- is seen as crucial to Iceland’s economic recovery.
Despite their opposing EU views, the Social Democrats and Left Greens insisted their coalition would continue, but they have not yet explained how they plan to overcome their differences.
Sigurdardottir said an absolute majority for her coalition, if confirmed, would be “historic.”
“If this is the result, these will be historic elections, as this is the first time that leftist parties will hold a majority.”
Meanwhile, a party formed at the height of the economic collapse and which has pushed for democratic reforms, the Civil Movement, looked set to enter parliament, credited with 7.4 percent of votes.