The FINANCIAL -- Iceland's Social Democratic Alliance party Saturday elected as chairman a lawyer known for his support of the euro, replacing Prime Minister Johanna Sigurdardottir who is due to retire at the end of her term.

"In the (April) elections ahead the strength of the Social Democratic Alliance will be tested as never before," Arni Pall Arnason said in his acceptance speech.

As Iceland's economic affairs minister between 2010 and 2011, Arnason advocated adopting the euro and positioned himself as a strong supporter of Reykjavik's plans to join the European Union.

Sigurdardottir became Iceland's first woman premier when a coalition with the Left Green was formed in 2009, at the height of the country's economic crisis that saw the collapse of its three biggest banks.

Although her popularity has faded somewhat since then, she has retained a reputation as an honest politician who helped clean up the financial mess after the country's debt-fuelled boom years.

Sigurdardottir's first job was as a flight attendant, before she stepped into the political fray and became a member of parliament in 1978.

Reykjavik has targeted a budget surplus for 2014 and its 2.6 percent growth in 2011 looks set to be repeated for the full-year 2012. As EUbusiness said, the next legislative elections in Iceland are scheduled for April 27.

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