Iceland's coalition government collapsed on Monday after an unprecedented wave of public dissent, plunging the island nation into political turmoil as it seeks to rebuild an economy shattered by the global financial crisis.

Prime Minister Geir Haarde resigned and disbanded the government he's led since 2006. Haarde was unwilling to meet the demands of his coalition partner, the Social Democratic Alliance Party, which insisted on choosing a new prime minister in exchange for keeping the coalition intact.

"I really regret that we could not continue with this coalition," Haarde told reporters. "I believe that that would have been the best result."

Iceland has been mired in crisis since October, when the country's banks collapsed under the weight of debts amassed during years of rapid expansion.

Thousands of angry citizens have joined noisy weekly protests against the government's handling of the economy, clattering pots and kitchen utensils in what some commentators called the "saucepan revolution."

The value of the country's krona currency has plummeted, hitting many Icelanders who took out special loans denoted in foreign currencies for new homes and cars during the boom years. In addition, Iceland must repay billions of dollars to Europeans who held accounts with subsidiaries of collapsed Icelandic banks.

Haarde's government has nationalized banks and negotiated about $10 billion in bailout loans from the International Monetary Fund and individual countries.

Haarde — a fiscal conservative with degrees from the University of Minnesota, Brandeis and Johns Hopkins — is suffering from cancer and has announced he would not seek another term. He called early elections last week, following the mass protests by Icelanders upset at soaring unemployment and rising prices.

Though largely peaceful, the protests have seen Reykjavik's tiny parliament building doused in paint and eggs hurled at Haarde's limousine. Last Thursday, police used tear gas to quell a protest for the first time since 1949.

Haarde said last week that he wouldn't lead his Independence Party into the new elections, because he plans to seek treatment in the Netherlands for his cancer.

Following discussions with Haarde, Iceland's figurehead President Olafur Ragnar Grimsson said he would hold talks with Iceland's four main political parties late Monday before asking one of the organizations to form an interim government.