Iceland has made a last-ditch compensation offer to Britain and The Netherlands in talks over $5 billion lost in "Icesave" accounts, ahead of a Saturday referendum that is expected to nullify the current deal.
Foreign Minister Ossur Skarphedinsson told the Financial Times Deutschland Iceland was awaiting replies from the British and Dutch governments to the offer that it hopes to present at home as a better alternative and avoid the referendum.
"We're continuing to negotiate and because of the deadline we're under high pressure like never before. Those are good conditions for achieving an agreement," Skarphedinsson told today's edition of the paper.
Should the referendum take place, a "No" vote was certain and the negotiations would be further drawn out, the paper quoted him as saying. Less than one-in-five Icelanders back the Icesave bill.
Most Icelanders see the financing terms of the bill as unfair and some want to vote down the deal to vent their anger and frustration Iceland being bullied a deal by two bigger countries. Rejection of the Icesave bill would likely freeze the foreign aid needed to resuscitate Iceland's economy and cloud its prospects of joining the European Union.
Skarphedinsson said Britain and The Netherlands could try to hinder Iceland's ambitions to join the bloc, but he had no reason to believe they actually would.
Support for accession has been falling in past months and membership now opposed by more than half of Icelanders, nearly twice the level seen just after the 2008 financial crisis in which three of Iceland's leading banks collapsed.
Traditionally go-it-alone Icelanders are concerned about losing control over their treasured fishing industry to the EU. Skarphedinsson was hopeful Icelanders would accept any cancellation of the referendum should a new deal more favourable to Iceland be struck.
But the ballot may be difficult to cancel without support from opposition parties, who are trying to turn the referendum into a vote on the centre-left government.