Iceland's Prime Minister Sigmundur David Gunnlaugsson said today he would dissolve parliament and call a new election if he did not receive the backing of coalition partner the Independence Party to remain in office.

Pressure has been mounting on Gunnlaughsson to resign after leaked documents showed his wife owned an offshore company with big claims on Iceland's collapsed banks. He spent the morning in talks with Finance Minister and Independence Party leader Bjarni Benediktsson.

"I went over that with the head of the Independence Party that if the MPs of the party did not feel up to supporting the government...I would dissolve the parliament and call for new elections as soon as possible," Gunnlaugsson said on his Facebook page.

Yesterday, the opposition filed a motion of no-confidence in the prime minister and thousands of protesters gathered outside parliament in a sign of growing anger about what the opposition said was the failure of Gunnlaugsson to disclose a conflict of interest over his wife's company.

Another demonstration is planned for later today.