STOCKHOLM – Iceland’s prime minister has asked the president on Tuesday to dissolve parliament in the face of a looming no-confidence vote and protests, after leaked files showed his wife owned an offshore firm with big claims on the country’s collapsed banks.

After a meeting with Prime Minister Sigmundur Gunnlaugsson, President Olafur Ragnar Grimsson said he had asked for talks with the main parties before making a decision. Dissolving parliament would almost certainly lead to a new election.

“I was not ready to agree to that request (for dissolving parliament) until I had a discussions with the leaders of other parties on their stand,” Grimsson told reporters.

“I do not think it is normal that the prime minister alone … should be given the authority to dissolve the parliament without the majority of the parliament being satisfied with that decision.”

Earlier on Tuesday, Gunnlaugsson said on his Facebook page: “I would dissolve parliament and call for new elections as soon as possible” if he lost support among his ruling coalition members.

On Monday, the opposition filed a motion of no-confidence and thousands of Icelanders gathered in front of parliament, hurling eggs and bananas and demanding the departure of the leader of the centre-right coalition government, in power since 2013.

People demonstrate against Iceland’s Prime Minister Sigmundur Gunnlaugsson
in Reykjavik, Iceland. (Photo: Reuters)

On Monday, the opposition filed a motion of no-confidence and thousands of Icelanders gathered in front of parliament, hurling eggs and bananas and demanding the departure of the leader of the centre-right coalition government, in power since 2013.

Gunnlaugsson would be the first casualty of the “Panama Papers” a leaked collection of documents revealing the financial arrangements of politicians and public figures from around the world.

The prime minister has stressed his wife’s overseas assets were taxed in Iceland and that he had put the interest of the public before his own in dealing with the financial claims.

But his opponents say it amounts to a conflict of interest and say he should have been open about the overseas assets and the company, especially since the government is involved in striking deals with claimants of the bankrupt banks.

A government spokesman has said the claims against Iceland’s collapsed banks held by the firm owned by the prime minister’s wife – in which he also temporarily held a stake – totalled more than 500 million Icelandic crowns ($A5.37 million).

Iceland’s main commercial banks collapsed as the global financial crisis hit in 2008 and many Icelanders have blamed the North Atlantic island nation’s politicians for not reining in the banks’ debt-fuelled binge and averting a deep recession.

– Reuters