Iceland is facing the prospect of tough coalition negotiations after a parliamentary election ousted the centre-right ruling government, but produced no clear winner.
With all the votes counted, the conservative Independence Party emerged on top with 29 per cent, giving it 21 seats in the 63-seat chamber, the Iceland Monitor news website reported, which is a gain of two seats.
Its former coalition partner, the right-wing liberal Progressive Party took a severe hit, losing 11 seats to end up with just eight, on 11.5 per cent of the vote, a drop of almost 13 percentage points.
With a combined 29 seats, the coalition is now three short of a majority in parliament.
A left-leaning coalition comprising the Pirate Party (10 seats, 14.5 per cent), the Left Green Movement (10 seats, 15.9 per cent), the Social Democratic Alliance (three seats, 5.7 per cent) and Bright Future (four seats, 7.2 per cent) also fell five short of the 32 seats needed to form a government.
The Regeneration Party - formed earlier this year by disgruntled members of the Independence Party - achieved 10.5 per cent of the vote and will send seven lawmakers to the new parliament, a pivotal bloc given the arithmetic of the result.
Five parties did not achieve enough votes to cross the 5-per-cent hurdle to enter parliament.
Some 246,500 Icelanders were eligible to vote in Saturday's election.
Turnout was 79.2 per cent, a historic low: at the last polls in 2013, 81.4 per cent of voters turned out.
The elections were triggered earlier this year when then-premier Sigmundur David Gunnlaugsson resigned after data from the Panama Papers leak suggested he and his wife had an offshore company in the British Virgin Islands. Both denied wrongdoing.
The elections originally scheduled for April 2017 were brought forward because of mass protests against the government.
The opposition said it wants to increase funding for healthcare and universities, but above all restore trust in the political system, damaged by the 2008 collapse of the country's main banks in the global financial crisis.
