Iceland's parliament rejected an opposition motion of no-confidence in the new government, which is struggling to shake off revelations from the leaked "Panama Papers" which have already forced the prime minister to step down.

There were no dissenting voices among the majority government's ranks and the motion was, as expected, rejected by 38 votes to 25 after an hour-and-a-half of debate.

Another motion, calling for the immediate dissolution of parliament was similarly defeated.

The country's new right-wing government took office on Thursday, under fire from the start with the opposition seeking the vote of no confidence and demanding swift elections.

New prime minister Sigurdur Ingi Johannsson replaced Sigmundur David Gunnlaugsson, who quit Tuesday amid mass protests over a hidden offshore account revealed in the so-called Panama Papers leak of millions of financial records.

Gunnlaugsson became the first major political casualty to emerge from the Panama Papers, resigning after the leak revealed that he and his wife owned an offshore company in the British Virgin Islands and had placed millions of dollars of her inheritance there.

Johannsson, a 53-year-old former veterinarian, had already announced new legislative elections to be held in "the autumn", about six months ahead of the scheduled April 2017 vote.

But protesters who demonstrated outside parliament called for the ouster of the coalition comprising Johannsson's centre-right Progressive Party and their junior partners, the Independence Party, and demanded elections be held sooner.

The government coalition does not want to hold a new election too quickly given the uproar over the Panama Papers scandal, as it would surely suffer from a resounding protest vote.

- 600 Icelanders in Panama Papers -

After the announcement of the new government late Wednesday, the leftwing and centrist opposition parties agreed to forge ahead with their motion of no-confidence, even though it had no chance of being adopted because of the government's majority.

Earlier it emerged that Gunnlaugsson sold his 50-percent share of the company to his wife for a symbolic sum of $1 at the end of 2009, but he had neglected to declare the stake as required when he was elected to parliament six months earlier.

Gunnlaugsson has said he regretted not having done so, but insisted he and his wife had followed Icelandic law and paid all their taxes in Iceland.

The issue is particularly sensitive in Iceland, a country marked by the excesses of the 2000s when senior bankers used shell companies in tax havens to conceal their dealings in risky financial products which ultimately led to the 2008 collapse of the nation's three main banks.

Johannsson, who held the important fisheries and agriculture portfolio in Gunnlaugsson's government, is meanwhile seen by critics as emblematic of the old guard that turned a blind eye to the reckless investments that brought about the financial meltdown.

The crisis plunged Iceland into a deep recession and left thousands mired in debt.

A poll at the end of March suggested that just three percent of voters had a favourable opinion of Johannsson.

Two other Iceland cabinet ministers, including Finance Minister Bjarni Benediktsson, have been singled out in the Panama Papers.

Benediktsson, who is expected to hold on to his post, has denied any tax evasion. He said he built an offshore company to launch a real estate project in Dubai that never materialised, and the company has no business.

According to a document released by Swedish television channel SVT, a partner of the International Consortium of Investigative Journalists which coordinated the investigation, at least 600 Icelanders are cited in the Panama Papers, out of the island's population of just 320,000.

They include former central bank governor Finnur Ingolfsson, Robert Wessman, the CEO of pharmaceutical firm Alvogen, and journalist Eggert Skulason of the DV newspaper.
Source: AFP