Pirate Party to try to form government

President Gudni Johannesson made the announcement after meeting with the head of the Pirates parliamentary group, Birgitta Jonsdottir.

"Earlier today I met with the leaders of all parties and asked their opinion on who should lead those talks. After that I summoned Birgitta Jonsdottir and handed her the mandate," he told reporters.

Iceland held snap legislative elections on October 29, in which none of the seven parties or alliances obtained a clear majority.

The conservative Independence Party, which performed best at the polls, initially tried to form a government with the liberal, centre-right Reform Party and the centrist Bright Future.

But they failed to find common ground on a range of divisive issues including relations with the European Union, institutional reform and fishing.

The president then called on the Left-Green Movement, the second-biggest party, to form a government.

Despite holding talks to build a broad, five-party coalition ranging from the centre-right to the far-left, disagreements over taxes and other issues led the negotiations to collapse in late November.

The president then allowed the parties to hold informal talks among themselves, which led the Independence Party and the Left-Green Movement to discuss terms for sharing power. But the diametrically opposed parties could not find enough common ground.

Giving the Pirate Party, which came third in the election, the chance to build a government has been seen as a bold move that is not guaranteed to be a success.

"I am optimistic that we will find a way to work together," Jonsdottir said.

The scandal over the Panama Papers, released in April, ensnared several Icelandic officials and led to the resignation of former prime minister Sigmundur David Gunnlaugsson, prompting the snap October 29 vote.

With voters keen to see political change, the small and controversial Pirate Party had vowed during the election campaign to implement radical institutional reforms for more direct democracy and greater transparency in public life.

It won 14.5 percent of votes, less than pollsters had predicted.