Like Iceland's right-wing before it, the Left-Green Movement said Friday it was abandoning all attempts to form a government after coalition talks failed, plunging the country into political uncertainty.
The head of the Left-Green Movement, Katrin Jakobsdottir, told reporters she had informed President Gudni Johannesson that she was unable to build a coalition after a week of negotiations.
"I told him I was giving up... I didn't obtain the results I wanted," she told state broadcaster RUV.
Iceland held legislative elections on October 29, with none of the seven parties or alliances obtaining a clear majority.
The largest election winner, the conservative Independence Party, initially tried to form a government with the liberal, centre-right Reform Party and the centrist Bright Future Movement.
But they failed to find common ground over a range of divisive issues including relations with the European Union, institutional reform and fishing.
The president then tasked the Left-Green Movement with trying to form a government, and held talks to build a broad, five-party coalition ranging from the centre-right to the far-left.
Disagreements over taxes, among other things, brought their negotiations down earlier this week.
Speaking before the media, the president said he still hoped it would be possible to form a government with the existing parliament, and not have to call new elections.
The scandal over the Panama Papers, released in April, ensnared several Icelandic officials and fuelled the resignation of former prime minister Sigmundur David Gunnlaugsson, prompting the snap October 29 vote.
The Independence Party, which has traditionally dominated Icelandic politics, came out on top in the vote, followed by the Left-Green Movement in second and the anti-establishment Pirate Party in third place.