Iceland PM to discuss Icesave deal with Barroso

(REYKJAVIK) - Iceland Prime Minister Johanna Sigurdardottir will meet European Commission chief Jose Manuel Barroso Thursday to discuss a disputed payout deal to cover the collapse of Icesave bank, an official said.

Her spokesman Hrannar Bjoernsson told AFP Tuesday: "The prime minister is in Brussels today. She will meet Jose Manuel Barroso on Thursday to discuss Icesave and the country's candidacy to the EU."

Iceland's parliament narrowly approved on December 31 the terms of a payout to London and The Hague after they compensated more than 320,000 British and Dutch savers who lost money in the collapse of the Icelandic bank.

But Iceland's president, Olafur Ragnar Grimsson, refused to sign the bill, citing public opposition to the 3.8-billion-euro (5.4-billion-dollar) deal and leaving it to a national referendum due March 6.

On January 5, The Netherlands said it was "extremely disappointed". Britain said it expected Iceland to live up to its obligations.

The European Commission hinted meanwhile that the Icesave imbroglio could have a negative impact on Iceland's bid to join the European Union.

The Icelandic government, which has staked its political future on the Icesave legislation, said on January 12 it hoped to open talks with Britain and The Netherlands in a bid to avoid the referendum.

Opinion polls suggest the poll will be won by the "No" vote.

Iceland's finance minister has met with counterparts from Britain, The Netherlands and the Nordic countries to discuss the Icesave issue.

Iceland submitted its EU application in July, in the hope that membership would help stabilise the economy following the October 2008 collapse of its once-booming financial sector.