Iceland's government has collapsed amid a scandal involving the prime minister's father. 

The liberal Bright Future party has pulled out of government, effectively triggering the collapse of the three-party coalition that was formed early this year after a tightly-contested election last October.

In a short statement published on their website, the party - which holds only four seats in the 63-seat parliament - said it was withdrawing from the coalition over a "serious breach of trust within the government".

It came after reports that Benedikt Sveinsson, the father of Prime Minister Bjarni Benediktsson, had offered a letter of recommendation to 'restore the honour' of a convicted paedophile.

The Reykjavik Grapevine reports that Hjalti Sigurjón Hauksson was convicted of having repeatedly raped his stepdaughter over 12 years while she was a child & teenager.

Mr Benediktsson is reported to have been aware of his father's efforts since the summer, but the information has only now become public following a ruling from a parliamentary committee.

The Ministry of Justice had previously refused to reveal who wrote the letter, Reuters reports, which has now led to allegations of an attempted cover up.

Opposition groups such as the Left-Green Movement and the Pirates party have now called for an election in the wake of the government's collapse.

'Restoring honour'

According to Iceland Monitor, an archaic legal clause in Iceland allows people who have committed serious crimes to apply to have their honour restored, allowing them to again seek employment.

A letter of recommendation is among the requirements to apply for the process.

Mr Sveinsson has apologised for his actions, saying he had signed an already drafted letter.

He said: "I have never considered the restored honour as anything except a legal procedure making it possible for convicted criminals to regain some civil rights. I did not think of it as something that would justify Hjalti's position towards his victim.

"What was supposed to be a small gesture of good will towards a convicted criminal has instead turned into a continuation of the tragedy for the victim. For this I again apologise," he added.