New Icelandic prime minister takes office

REYKJAVIK, Iceland --Geir Haarde became Iceland's new prime minister Thursday, marking a return to the office for Iceland's largest political party and a likely shift toward a tighter fiscal policy.

Haarde said the new administration will focus on the economy and continue discussions with the U.S. over the nation's defense.

The country's coalition government was quickly restructured last week under the fiscally conservative Independence Party after Halldor Asgrimsson announced his resignation as prime minister in the wake of his Progressive Party's poor performance in local elections.

Birgir Armannsson, an Independence Party lawmaker, said Haarde's support within the party will give him a stronger mandate to carry out the government agenda. Haarde took over as foreign minister and chairman of the Independence Party when former Prime Minister David Oddsson retired in 2005.

At the top of the new administration's agenda is dealing with economic expansion that has pushed the nation's inflation rate to 7.6 percent.

Another priority is securing a new defense arrangement after the U.S. announced in March that later this year it would end its military presence in Iceland -- which does not have its own military.

Though the U.S. has said it remains committed to Iceland's defense under a 1951 NATO agreement, it has not announced how it will defend the country after leaving in September.