Iceland's Prime Minister Geir Haarde went to the presidential palace today where he officially handed his resignation to President Olafur Ragnar Grimsson.
The resignation followed the government's collapse as a result of the escalating economic crisis.
Mr Haarde told reporters this morning 'I'm here to announce that I and the leader of the Social Democrats have decided that we will not continue with the coalition.'
The announcement came just days after Mr Haarde announced he would not seek re-election because he has cancer, saying snap elections should be held on 9 May.
Foreign Minister Ingibjorg Gisladottir, the Social Democrat leader who had been considered a potential replacement for Mr Haarde, also announced she would not seek to be prime minister and would take a leave of absence for one or two months.
Mr Haarde's government, a coalition between his Independence Party and the Social Democratic Alliance, has been under pressure since the global financial crisis hit Iceland in October.
Iceland saw its banks collapse following a decade-long boom fuelled by cheap foreign funding.
Protests have been held regularly on Saturdays since the crisis started last year and for the six days straight.
Polls show both coalition parties trailing the opposition Left-Green Party, indicating that a shift in power is likely.
The government collapse did not cause any new trade in Icelandic CDs or the island country's krona currency.
Mr Haarde had already said on Friday he would not seek re-election because he has cancer, and had proposed an early parliamentary election on 9 May.
