A left-wing coalition under the world’s first openly gay national leader has swept to power in Iceland after voters punished conservatives for driving the country towards bankruptcy.

“Our time has come!” said the Social Democrat Jóhanna Sigurdardóttir, 66, who will lead a coalition with the Left-Green party. Together they have an absolute majority, a first for a left-wing government in Iceland.

Her victory is seen as a return to left-wing policies after almost 18 years of conservative Independent party domination and a sign too that women are going to take a stronger role in running the country. More women than ever before were returned to parliament and Icelandic media claimed that the island’s ancient assembly was now fourth in the world in terms of female participation.

The Independent party — which privatised the banks and allowed the financial sector to balloon out of all proportion to the GDP — recorded its worst result of modern times. Some of the disaffected conservatives, frustrated at the increasing number of corruption stories emerging from party headquarters, switched their allegiance to another centre-right party, the Progresives.

The Government has two balancing acts to perform.

One is to meet the stringent conditions of the International Monetary Fund while at the same time keeping enough control over the budget to redistribute resources to help those affected by the meltdown. The economy is expected to shrink by 10 per cent this year, inflation is raging and the whole country is crippled by debt. The fundamental problem is not so much who rules Iceland, as whether the country can be ruled at all as long as the full scope of the crisis is unknown.

Second, Ms Sigurdardóttir has to convince her eurosceptic party and the country that her ambition of joining the eurozone will not put the country’s fish stocks at risk. The fear is that Iceland will have to sign up for the EU Common Fisheries Policy and lose control over its territorial waters.

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