Reykjavik  - Iceland's new social democrat Prime Minister Johanna Sigurdardottir unveiled her coalition cabinet on Sunday, which sees the island state ruled in partnership with the Green party.

The announcement of the new government comes two weeks after elections which saw Sigurdardottir beat the long-ruling centre-right government after the implosion of the country's banking sector and economy.

The first test for the government will be a planned application to finally join the European Union, which Sigurdardottir will put to the 63-seat parliament, but which the Greens have been opposed to.

However, following public protests on the streets following the banking collapse, an EU membership bid now has popular support.

Green party leader Steingrimur Sigfusson will become finance minister in the coalition, with the Social Democrats' Ossur Skarphedinsson as foreign minister.

The collapse of the country's three largest banks last autumn left the 320,000 strong population of Iceland facing growing unemployment and huge national debt.

Sigurdardottir had been ruling as caretaker prime minister prior to the April elections, following the collapse of the conservative government under Geir Haarde. (dpa)