REYKJAVIK (AFP) - The president of Iceland said Thursday he would delay a decision on a deal approved by parliament to pay Britain and the Netherlands for having compensated savers in a failed Icelandic bank.

Confronted with popular opposition to the payout plan, adopted late Wednesday by parliament, President Olafur Ragnar Grimsson said he would not "decide today on this project," as had been expected.

On Saturday he is to receive a petition signed by nearly 40,000 of the island's 320,000 inhabitants opposing the arrangement.

If the president refuses to endorse the legislation, the issue would be put to a referendum.

An earlier hold-up in implementing the compensation scheme had threatened to complicate Iceland's bid to join the European Union and to receive financial assistance from the International Monetary Fund.

Earlier Thursday, ratings agency Standard & Poor's rewarded the decision by parliament with an announcement that it had raised its outlook on Iceland's credit standing to "stable" from "negative."

The agency said it was also maintaining its long- and short-term BBB-minus/A-3 rating on the country's foreign currency debt.

Parliament late Wednesday authorised payment of 3.8 billion euros (5.4 billion dollars) to the British and Dutch governments, which had partially compensated more than 320,000 of their savers who lost money in the collapse of the Icesave online bank.

Icesave, an online subsidiary of the Landsbanki bank that had to be rescued in October 2008 as the global credit crunch hit, had attracted savers due to its high interest rates.

"While parliamentary passage of the Icesave agreement will add significantly to the general government's debt burden, it is a decisive step to unlock further disbursements of up to 2.3 billion euros from the International Monetary Fund and from bilateral loans from Nordic governments," said S&P; credit analyst Morton Kraemer.

"These funds will alleviate Iceland's still weak external liquidity position by raising the central bank's foreign exchange reserves, currently around 2.5 billion euros."

Britain and the Netherlands had objected to amendments added to an initial compensation agreement, sparking a dispute that threatened to hamper Iceland's bid to join the European Union.

The government then drafted a new deal, which got through parliament on Wednesday by a vote of 33 to 30.

The dispute over the compensation scheme had also delayed the disbursement of funds under of a 2.1-billion-dollar IMF standby loan arranged in November 2008 following the collapse of Iceland's banks.

The IMF announced on December 14 it had reached an agreement with Iceland on the release of a third tranche of the loan.

Iceland suffered a major economic blow in October 2008 when its three main banks collapsed, bringing to a screeching halt a decade of prosperity.

Thousands of Icelanders lost their jobs and their savings as a result.

In August, the central bank forecast a recession of 9.0 percent for this year, slightly better than initially expected. The economic slump is however expected to continue next year, with the economy forecast to contract by 2.0 percent.