Iceland PM defies calls to resign amid crisis

Iceland's prime minister said Saturday he has no intention of stepping down over his country's economic meltdown, even as thousands of angry citizens demanded his resignation during a noisy protest outside parliament.

Geir H. Haarde said he intended to lead Iceland through a crisis that has seen the spectacular collapse of the island's high-flying "Nordic tiger" economy - and which he predicted would worsen next year.

"I think it's inevitable that we will have a severe drop in GDP, in purchasing power, in employment," Haarde told The Associated Press during an interview at his office in central Reykjavik. He said 2009 "will be a very difficult year for us."

A crowd of 4,000 to 5,000 people gathered in the bitter cold outside the tiny stone building that houses Iceland's parliament, demanding elections for a new government. Many expressed a sense of shock and betrayal at their country's sudden fall from grace.

Just last year, this volcanic island on the edge of the Arctic Circle topped a United Nations "best place to live" poll. But last month Iceland's three major commercial banks collapsed under the weight of huge debts amassed during years of rapid economic growth. Since then the value of Iceland's currency, the krona, has plummeted, businesses have gone bankrupt and hundreds of people are losing their jobs each week in this nation of 320,000 people.

"Everything's gone to the dogs," said protester Hilmar Jonsson. To illustrate the point, he came to the demonstration accompanied by a Labrador, two Chihuahuas and a silky terrier, all decked out in sweaters of the red, white and blue Icelandic flag.

Anti-government protests that began eight weeks ago have grown larger and angrier, and draw a wide cross-section of Icelandic society. Saturday's crowd included everyone from anarchists in ski masks to young families and retirees.