Iceland may face new election after governing party's quit

REYKJAVIK – 15 September 2017: One of Iceland's three coalition parties said on Friday it would quit the government formed just nine months ago, citing a "breach of trust" after the prime minister's party allegedly tried to cover up a scandal involving his father.

That leaves the country, whose economy was wrecked by the collapse of its banking sector nearly a decade ago, facing its second snap election in a year after the previous government was felled by the Panama Papers scandal over offshore tax havens.

"The board of Bright Future has decided to terminate cooperation with the government of Bjarni Benediktsson," the party said in a statement on Facebook. "The reason for the split is a serious breach of trust within the government."

The scandal centres on a letter written by Prime Minister Benediktsson's father to help an old friend convicted of sex offences against children have his criminal record expunged.

The Ministry of Justice, under minister Sigridur Andersen, a member of Benediktsson's Independence Party, had initially refused to disclose who had written the letter of recommendation but was later ordered to do so by a parliamentary committee.

Andersen told broadcaster Stod 2 that she had informed Benediktsson about his father's involvement last July, but had not disclosed that information to anyone else.

The Independence Party was not immediately available for comment when contacted by Reuters on Friday.

The third party in the centre-right coalition, which had a majority in parliament of just one seat and took two months to form following an election last year, called for a new poll.

"In light of the situation, the Vidreisn (Reform party) ... thinks the right thing to do is to call an election immediately," it said in a statement.

The prime minister's father, Benedikt Sveinsson, confirmed in a statement on Friday that he had signed a letter supporting the friend's application to have his "honour restored", a procedure that effectively erases a person's criminal record.

Among the requirements to obtain the status is a letter of recommendation from a close friend or associate.

Sveinsson said he had not discussed the letter with anyone.

"In light of all that has come forth lately, I'd like to apologize to all those who have been hurt because of the matter," he said in the statement.