The move yesterday came after former Prime Minister and ruling Progressive Party (PP) chairman Sigmundur Gunnlaugsson stepped down in the wake of the leaked Panama Papers, media reported yesterday.

The leaks, from Panama law firm Mossack Fonseca, showed Gunnlaugsson owned an offshore firm with his wife. However, Gunnlaugsson said he sold his shares to his wife and denies any wrongdoing. But he is accused of concealing millions of dollars' worth of family assets.

It was unclear whether the move would satisfy angry Icelanders, who staged a mass demonstration outside parliament for a third consecutive day yesterday.

Johannsson is expected to meet Iceland's president, Olafur Ragnar, later today to seek his approval to become the country's next prime minister.

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