Iceland bank deal rejection 'separate to EU entry bid'

(STRASBOURG) - Iceland's massive rejection of a deal to repay Britain and The Netherlands for losses from the Icesave bank collapse is separate to its bid to join the European bloc, an EU commissioner said.

The vote was "not against EU membership", European Union Commissioner for Enlargement and European Neighbourhood Policy Stefan Fuele told European deputies in Strasbourg Monday.

"It was a disagreement with the conditions of the loan," he said. "These are two separate subjects."

This did not mean the commission was not interested in the competency of Iceland's government and how well its financial system worked, he said.

"We have paid so far -- and will be paying -- a tremendous attention to this matter," he said.

"And we believe -- as (do) all the three parties -- that a solution could be found on the conditions to repay the loan provided by the Dutch and the UK government," he said.

Just over 93 percent of voters gave a resounding rejection in a referendum Saturday to a plan to pay the countries 3.9 billion euros (5.3 billion dollars) in compensation for losses suffered by British and Dutch depositors.

The European Commission recommended on February 24 the start of negotiations with a view to admitting Iceland into the European Union. It is now up to the 27 member states to endorse the commission's decision.

Several European deputies had on Monday raised the possibility of a rejection of their entrance after the weekend vote.

Around 340,000 British and Dutch citizens were hit by the collapse of Icesave in 2008.

Reykjavik has for weeks been attempting to hammer out a new agreement with Britain and The Netherlands to compensate them for their losses.