1979 Icelandic parliamentary election

The 1978 parliamentary election resulted in a hard swing to the left in Icelandic politics. Progressive party leader and former Premier Ólafur Jóhanesson emerged as the head of a coalition consisting of his Progressives, the Social Democrats, and the People's Alliance. Very quickly the disparate views of the coalition began to make themselves very clear, especially in terms of foreign policy.

The Progressives were a traditionally isolationist party who supported Iceland's membership in NATO but opposed the U.S. Navy base in Keflavik. These views were not shared with their coalition partners as the People's Alliance opposed both NATO and the Keflavik base, and the Social Democrats were supportive of both.^{[3][page needed]}

Furthermore the coalition faced intense economic scrutiny for their reaction to the inflation crisis. The coalition acted to devalue the Icelandic Krona for the fourth time since 1974. This massively undermined the credibility of the People's Alliance as they had promised to not devalue the Krona.^{[3][page needed]}

The government collapsed after the Social Democratic party withdrew following the news that inflation had hit 85%. The Social Democrats led the interim government that brought Iceland into its first winter election.

The government was formed in February 1980 as Independence Party deputy leader Gunnar Thoroddson (followed by two fellow dissidents) broke ranks with his party and formed a coalition with the People's Alliance and the Progressives.