Icelandic Prime Minister Johanna Sigurdardottir told a news conference on Friday that a deal to repay billions in lost savings to the Netherlands and the UK is still possible.

"We do not think that negotiations have stranded and there's still a possibility to reach a reasonable solution between the three nations," she told reporters in Reykjavik.

"We still have something up our sleeves," she told the Reuters news agency after the conference.

Late Thursday, the latest round of talks fell apart between Iceland, Britain and the Netherlands, over the repayment of $5.7 billion (4.2 billion euros) lost by Icelandic Internet bank Icesave.

Referendum still on the cards

Iceland had planned a referendum on March 6 to decide whether to approve the terms of an Icesave deal negotiated with the British and Dutch governments last summer.

Siguardottir said there was still a chance, albeit a slim one, to avoid the referendum.

Officials from all three countries have been meeting in London for the past two weeks to try and thrash out a consensus on how to return funds spent by Britain and the Netherlands to compensate their citizens' depositors the Icelandic Internet bank, which collapsed with its parent Landsbanki in October 2008.

Some 320,000 British and Dutch savers were victims of the Icesave collapse.

Iceland's President Olafur Ragnar Grimsson has refused to sign legislation approved by parliament that would pay the two governments 3.8 billion euros for their reimbursements.

Reykjavik rejected deal

Grimsson instead referred the issue to a referendum, citing public opposition, and opinion polls predicting the legislation would be rejected.

Officials with knowledge of the talks said the main revision under discussion was a floating interest rate, replacing the 5.6 percent under the previous deal, AP news service reported. Such a rate could make it cheaper for Iceland to repay its loans.

Looking for next move

A spokesman for the British Treasury said his and the Dutch governments were "disappointed" by the result. "We have consistently supported Iceland's economic recovery and our latest proposal built upon this," he said.

According to a source familiar with the situation, there are no new talks scheduled between Iceland and the Netherlands, so whether a deal can be reached is still unclear.

The latest developments could further threaten the likelihood of Iceland joining the European Union, as the UK and the Netherlands have hinted that they will block accession talks with the north Atlantic nation if the Icesave issue is not resolved.

ng/jen/Reuters/AP/AFP
Editor: Nancy Isenson