The latest crisis comes as the country launches its debut licensing round today.
Early this morning, police used tear gas against anti-government protesters after a demonstration outside the parliament - the Althing - in Reykjavik became violent.
About 3000 protesters had gathered to face riot police surrounding the Althing, hurling fire crackers at the building and chanting "disqualified government".
The demonstration is believed to be the largest in Reykjavik since Iceland joined Nato in 1949.
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