Iceland Soc Dem head won't seek re-election-report

REYKJAVIK, March 8 Sun Mar 8, 2009 3:46pm EDT

REYKJAVIK, March 8 (Reuters) - The leader of Iceland's Social Democrats, whose party is the dominant partner in an interim government, has decided not to stand for re-election to parliament, daily Morgundbladid reported on Sunday.

Ingibjorg Gisladottir, a former foreign minister who has been battling cancer, told a news conference that she could not continue to lead her party due to her illness, the paper said.

"My illness has turned out more serious ... and now I must focus on my recovery," Morgunbladid quoted her as saying.

The Social Democrats had been the junior partner in a previous government coalition, which collapsed in January. They then formed a caretaker administration, together with the Left-Greens, ahead of elections that have been slated for April.

The previous government, led by the Independence Party, was heavily criticised over its handling of a financial crisis which has ruined the once-prosperous island's economy.

During the political upheaval in January, Gisladottir ruled out becoming prime minister, paving the way for fellow party member Johanna Sigurdardottir to take the lead role in the interim government.

Gisladottir said she would step down from the party leader post at a party congress on March 27-29 and that she would not stand for re-election to parliament. She said the party would elect a new party leader at the congress.

Iceland's economy collapsed in early October after its top banks failed under the weight of a mountain of debts and its currency ceased to trade on international markets. Despite a $10 billion IMF-led aid package late last year, public anger swelled and eventually led to the resignation of former Prime Minister Geir Haarde. (Reporting by Omar Valdimarsson via Stockholm newsroom, tel: +46-8-700 1017, e-mail: stockholm.newsroom@thomsonreuters.com))

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