Bjarni Benediktsson's Independence Party won most votes in the snap election, but it is not clear whether the incumbent prime minister can form a viable coalition.

Bjarni Benediktsson addresses supporters of the conservative Independence Party at the Grand Hotel on October 28, 2017 in Reykjavík, Iceland. (AFP)
Bjarni Benediktsson addresses supporters of the conservative Independence Party at the Grand Hotel on October 28, 2017 in Reykjavík, Iceland. (AFP) (AFP)

Iceland's conservative prime minister came out on top in a snap election despite a string of scandals, final results confirmed on Sunday. But it's unclear whether he will be able to form a viable coalition.

PM Bjarni Benediktsson, 47, was named last year in the "Panama Papers" worldwide tax-evasion leaks. He has also been accused of wrongdoing during Iceland's financial collapse in 2008.

His Independence Party, however, beat its rivals in Saturday's election, according to final results published on Sunday, although no party came near to winning a majority in parliament.

The Independence Party won 16 seats in the 63-seat parliament. Turnout was 81 percent.

It could now take days, weeks or even months before Iceland has a new government in place as thorny coalition negotiations await.

Left-leaning coalition?

Benediktsson's challenge comes from the Left-Green Movement and its potential allies, the Social Democratic Alliance and the anti-establishment Pirate Party.

The Left-Green Movement came in second with 11 seats, the Social Democratic Alliance with seven seats, and the Pirates with six seats.

Eight parties won seats in parliament.

Iceland's President Gudni Johannesson has invited the leader of each of those parties  to his residence on Monday.

After meeting them individually, he will decide who gets the first mandate to try to assemble a government. 

Under the Icelandic system, the president, who holds a largely ceremonial role, usually tasks the leader of the biggest party with putting a government together. 

"I am optimistic that we can form a government," Benediktsson said after the polls closed on Saturday.

The Independence Party lost five seats in parliament, according to Sunday's results, but still came out on top – apparently helped by Iceland's thriving economy, fuelled by a flourishing tourism sector.

Tough talks

The party has been involved in almost every government in Iceland since 1980.

But growing public distrust of the elite has spawned several anti-establishment parties.

These have splintered the political landscape and made it increasingly difficult to form a stable government.

Benediktsson's main rival, the Left-Green Movement won fewer votes than expected.

It will need at least five allies to form a 32-seat majority to dethrone the conservatives.

If it manages to do so, it would form only the second left-leaning government in Iceland since the country's proclamation as a republic in 1944. 

"I'm worried that we may have to face up to the likelihood of long, drawn-out discussions and attempts to form a government," Arnar Thor Jonsson, a law professor at Reykjavik University, said.

Negotiations to form a coalition after the October 2016 election took three months.

Some voters are tired. It was Iceland's fourth election since 2008 and the second in a year.

"I hope we will have more stable politics now ... but I'm rather pessimistic about it," Einar Orn Thorlacius, a lawyer in Reykjavik, said.

A comeback

Benediktsson called Saturday's election after a junior member of his centre-right coalition pulled out over accusations that the prime minister had covered up his father's recommendation letter for a convicted paedophile to help "restore his honour."

Benediktsson is a former lawyer and businessman whose family is one of the richest and most influential in Iceland.

He has been implicated in several financial scandals and was mentioned in the Panama Papers -- leaked documents that exposed offshore tax havens.

That scandal forced the resignation of then prime minister Sigmundur David Gunnlaugsson.

Gunnlaugsson made a come-back to lead one of the new parties that ran in Saturday's election.

Analysts said the strongest possible government would be a three-party coalition comprising the two biggest parties, the Independence and the Left-Greens – but their clashing ideologies make such a collaboration unlikely.

Left-Green leader Katrin Jakobsdottir, 41, said on election night she was keeping all options open.

"We have eight parties in parliament and right now there doesn't seem to be any obvious majority. All parties are open for discussion," she said.

Her campaign promises included investing in social infrastructure and ensuring that Iceland's economic prosperity reaches the health care and education sectors.