The prime minister of Iceland said last night he planned to step down, and media reports said the foreign minister would take his place.
Prime Minister Halldor Asgrimsson had earlier told local media he would take responsibility for the poor performance of his Progressive Party in local elections on May 27th.
Newspaper Morgunbladidquoted Mr Asgrimsson as saying talks would be held with Foreign Minister Geir Haarde, head of senior coalition partner the Independence Party, on forming a new government under Mr Haarde.
Mr Asgrimsson will stay head of the Progressive Party for now.
The Independence Party has dominated Icelandic politics, with former prime minister David Oddsson serving for 13 years to 2004 to become Europe's longest-serving prime minister.
Mr Oddsson led wide economic reforms and helped decrease Iceland's dependency on fishing, though the industry still accounts for a large share of its exports.
Mr Asgrimsson came to power in 2004 in a deal with the Independence Party, and Mr Oddsson became foreign minister and then moved to head the central bank.