Government-forming talks \'underway\' in Iceland

The head of Iceland\'s centrist-agrarian Progressive Party began talks Sunday with the right-wing Independence Party aimed at forming a government, the two sides said. The two parties, which have a long tradition of governing together, were the two big winners in the North Atlantic nation\'s legislative elections on April 27. Progressive Party leader Sigmundur David Gunnlaugsson was tasked last week by President Olafur Ragnar Grimsson with trying to build a government. \"I feel good about this. There are of course many and big issues to discuss so this will take some time, but it\'s right to be optimistic, in the beginning at least,\" Gunnlaugsson told the Bylgian radio station on Sunday. The head of the Independence Party, Bjarni Benediktsson, said meanwhile he saw no major hurdles in the negotiations and expected a deal to be reached in the coming week. \"At this point I see nothing in particular that should be difficult to reach an agreement on,\" he told public broadcaster RUV. \"I think, when I look at the week ahead, that it should be ample time for us to put it to the test.\" The Progressives and the Independence Party each won 19 seats in the election. The Independence Party garnered 26.7 percent of the popular vote, edging out the Progressives which took 24.4 percent. While the biggest party is traditionally asked to form a government, President Grimsson announced in a surprise move that he had solicited the Progressive leader because his party showed the biggest election gain by more than doubling its number of seats in parliament, from nine to 19. The two parties were in power together from 1995 until 2007, and their financial deregulation policy during those years has generally been blamed for the 2008 collapse of Iceland\'s banking system. The outgoing government of Social Democratic Prime Minister Johanna Sigurdardottir was punished by voters after imposing tough austerity measures to shore up the economy following the financial meltdown, and scored just 12.9 percent of votes, or nine seats. Gunnlaugsson said last week that the main priority for his party during negotiations would be the party\'s crunch election issue of how to lower households\' mortgage payments, as many Icelanders still suffer from the effects of the crisis. \"It is of great importance that our coalition parties or party are willing to try to reach a solution in that matter,\" he said.