Page last updated at 19:40 GMT, Sunday, 10 May 2009 20:40 UK

Iceland's PM to seek vote on EU

Johanna Sigurdardottir (26.4.09)
Johanna Sigurdardottir says she has high hopes for the new coalition

Iceland's new Prime Minister Johanna Sigurdardottir says her government will seek a parliamentary vote on membership of the European Union.

She says she is confident of a vote in favour even though her own coalition partners are opposed.

Mrs Sigurdardottir was elected last month on a wave of discontent over the dire state of Iceland's economy.

Iceland has been traditionally Euro-sceptic, but support for joining the EU rose after last year's banking crisis.

"There is a parliamentary majority for EU membership talks," she told a news conference.

"The application should be going to Brussels no later than July."

Parliament resumes

Mrs Sigurdardottir said a bill authorising EU accession talks would be introduced when Iceland's parliament - the Althingi - resumed sitting on Friday.

Her Social Democratic Alliance supports EU membership while her coalition partners, the Left Green Movement, oppose it.

Talks on forming a government hit a sticking point over whether Iceland should seek EU membership, and potentially embrace the euro - which many Icelanders see as the country's best route out of financial crisis.

Anti-government protest in Reykjavik, 24 Jan 09
The economic meltdown late last year led to street protests

Finance Minister Steingrimur Sigfusson said the two parties had "agreed to disagree" on the membership issue.

"This is a compromise," he said. "When it comes to voting on the resolution, the members of parliament will only be bound by their own conscience."

A final decision on EU membership would be put to Icelanders in a referendum, the government said.

EU Enlargement Commissioner Olli Rehn said in January that if Iceland applied soon, it could be fast-tracked to join the bloc at the same time as Croatia, which is expected to become a member by 2011.

Banks collapse

The Nordic island, which has a population of 320,000, had one of the world's highest standards of living until the global financial crisis led to the collapse of the country's banking system late last year.

Unemployment and inflation have both spiralled while the value of the currency, the krona, has plummeted.

Last October the government took control of Iceland's three largest banks and later received a $2.1bn (£1.4bn) loan from the International Monetary Fund (IMF).

The new government says its key goal is to rebalance the state budget by 2013 and that it remained committed to an economic recovery programme agreed with the IMF.

"I have very high hopes for this government," said Mrs Sigurdardottir. "We are taking office in extraordinary circumstances and have immense tasks ahead of us."

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