REYKJAVIK - Iceland’s Left-Green movement agreed on Sunday to start formal talks on forming a new coalition government, three weeks after snap elections triggered by the Panama Papers scandal.

Allied with the anti-establishment Pirate Party, the Social Democrats and the Bright Future party, the Left-Green faces the uphill task of forging a governing coalition with the centre right Reform Party.

"Everyone is ready to start formal talks", said Katrin Jakobsdottir, the leader of the Left-Green movement, the second largest party.

"We will form working groups that will work in different issues for the next few days and then we will see if there is a foundation for forming a government", Jakobsdottir told the Iceland Monitor online daily.

Pirates co-chairman, Birgitta Jonsdottir, told state broadcaster RUV she was optimistic the five parties would reach consensus on major issues.

"The people want very much to see improvement in both the work in the parliament and the image of the parliament," Jonsdottir said.

But the WikiLeaks supporter warned that the five-party government could be a step away from the political fights that have been the norm in Icelandic politics in recent years.

Since its independence in 1944, Iceland has only seen one centre-left government, which emerged from the 2009 election after the 2008 financial collapse.

"We embark on this in full integrity and we have the responsibility to try to get things together," Jakobsdottir told RUV.

Led by the largest election winner Independence Party, the centre-right coalition failed to find common ground over a range of divisive issues including relations with the European Union, institutional reform and fishing.

The October 29 snap vote, prompted by a massive tax scandal ensnaring several Icelandic officials, saw the Pirates become the third largest party with 10 seats.

The Panama Papers, released in April, fuelled the resignation of former prime minister Sigmundur David Gunnlaugsson and prompted the snap vote. — AFP