Iceland wants option to renegotiate Icesave deal if needed

By Mia Shanley and Omar Valdimarsson

REYKJAVIK (Reuters) - Iceland is trying to address widespread public anger over a deal to reimburse Britain and the Netherlands for billions lost in Icelandic accounts by ensuring it can renegotiate its debt if needed.

A political adviser to Iceland's foreign affairs minister told Reuters on Monday that some members of parliament wanted better conditions on a deal to pay back depositors who lost money in Icesave accounts.

"This is the highest bill Iceland has ever seen," Kristjan Guy Burgess said. "Parliament wants to be sure that it's going to be possible for Iceland to shoulder this responsibility."

Some 300,000 savers in Britain, and others in the Netherlands, had funds deposited in Icesave accounts run by Landsbanki, one of the three top Icelandic banks that failed last year when the country's financial system collapsed.

Burgess said parliamentary committees had been tied up working on the details of the Icesave bill, which is headed for a vote in parliament later this week.

Whether or not the Icesave issue is resolved could have huge implications for the hard-hit Atlantic island, whose recently elected government hopes to submit an application to join the European Union this month after parliament votes on starting accession talks this week.

Analysts say the EU is not likely to entertain an application unless an Icesave deal is set in stone while Icelanders, just warming to the prospect of joining the 27-member bloc, are fuming over promises made by the government and conditions set in the deal.

"The treaty with the UK and the Dutch governments is not going down very well here in Iceland," said Magnus Magnusson, Director at the Social Science Research Institute at the University of Iceland.