Panama Papers: Iceland PM Sigmundur Gunnlaugsson steps down Published duration 6 April 2016

image copyright EPA image caption Iceland's president refused Sigmundur Gunnlaugsson's request to dissolve parliament

Iceland's prime minister has stepped down - the first major casualty of the leaked Panama Papers that have shone a spotlight on offshore finance.

The leaks, from Panama-based law firm Mossack Fonseca, showed Sigmundur Gunnlaugsson owned an offshore company with his wife but had not declared it when he entered parliament

He is accused of concealing millions of dollars' worth of family assets.

Mr Gunnlaugsson says he sold his shares to his wife and denies any wrongdoing.

He is one of dozens of high-profile global figures mentioned in the 11.5 million leaked financial and legal records, which were first published on Sunday.

Pressure on Mr Gunnlaugsson to step down had been building since then, with thousands of people protesting outside the parliament building in the capital Reykjavik on Monday and opposition parties tabling a confidence motion.

Earlier on Tuesday, the prime minister had asked President Olafur Ragnar Grimsson to dissolve parliament and call an early election.

image copyright AP image caption Iceland's prime minister stepped down ahead of a confidence vote in parliament

But Mr Grimsson said he first wanted to consult leaders of the Independence Party, which has been in the ruling coalition with Mr Gunnlaugsson's Progressive Party since 2013.

Gudlaugur Thor Thordarson, the chairman of the Independence Party, said the prime minister's request had come as a "total surprise" and was not "the rational thing to do".

Ahead of the proposed confidence vote, Agriculture Minister Sigurdur Ingi Johannsson told reporters that the prime minister was stepping down and that the Progressive Party planned to name him new leader and propose that he become prime minister.

However, Mr Gunnlaugsson put out a statement hours later insisting that he had not in fact resigned and Mr Johannsson would take over the post "for an unspecified amount of time".

Confusion surrounding Mr Gunnlaugsson's status continued into Wednesday and further protests were due to be held later in the day.

Katrín Jakobsdottir, head of the Left-Green Movement, told the Reuters news agency that opposition parties still wanted early elections.

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The documents leaked from Mossack Fonseca show that Mr Gunnlaugsson and his wife bought the company Wintris in 2007.

He did not declare an interest in the company when entering parliament in 2009. He sold his 50% of Wintris to his wife, Anna Sigurlaug Palsdottir, for $1 (£0.70) eight months later.

Mr Gunnlaugsson maintains no rules were broken and his wife did not benefit financially.

The offshore company was used to invest millions of dollars of inherited money, according to a document signed by Mrs Palsdottir in 2015.

media caption Barack Obama said the leaks make "hard-working Americans feel the deck is stacked against them"

Court records show that Wintris had significant investments in the bonds of three major Icelandic banks that collapsed during the financial crisis which began in 2008.

Some of Icelanders' anger is believed to stem from the perceived conflict of interest.

The prime minister was involved in negotiations about the banks' future and had characterised foreign creditors who wanted their money back as "vultures", while Wintris itself was a creditor.

Mr Gunnlaugsson had kept his wife's interest in the outcome a secret.

In his statement, Mr Gunnlaugsson said he had no wish to stand in the way of further government work, such as reform of the financial system.

Addressing the issue of his wife's assets, the statement says the couple have "never sought to hide these assets from Icelandic tax authorities and these holdings in Wintris have been reported as an asset on the prime minister's wife's income tax returns since 2008 and taxes have been paid accordingly in Iceland.

"No parliamentary rules on disclosure have been broken. Even the Guardian and other media covering the story have confirmed that they have not seen any evidence to suggest that the prime minister, his wife, or Wintris engaged in any actions involving tax avoidance, tax evasion, or any dishonest financial gain."

Mr Gunnlaugsson took to Facebook on Wednesday to complain about the recent pressure on his family as well as some of the reporting surrounding his wife. Misinformation and speculation had become so great in some media, he said, that one report even suggested his wife was hoping to travel into space.

Panama Papers - tax havens of the rich and powerful exposed

Eleven million documents held by the Panama-based law firm Mossack Fonseca have been passed to German newspaper Sueddeutsche Zeitung, which then shared them with the International Consortium of Investigative Journalists. BBC Panorama is among 107 media organisations - including UK newspaper the Guardian - in 76 countries which have been analysing the documents. The BBC does not know the identity of the source

They show how the company has helped clients launder money, dodge sanctions and evade tax

Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing

Tricks of the trade: How assets are hidden and taxes evaded

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