REYKJAVIK (AFP) - Iceland has rejected a proposal from Britain and the Netherlands that would compensate depositors who lost money in the collapse of an Icelandic bank in 2008, Finance Minister Steingrimur Sigfusson said Monday.

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However, he stressed that his government wanted to continue negotiating on an arrangement to reimburse 320,000 British and Dutch savers victimised by the failure of the online bank Icesave in October 2008.

The president of Iceland, Olafur Ragnar Grimsson, has refused to sign legislation approved by parliament that would pay the British and Dutch governments 3.8 billion euros (5.2 billion dollars) for their reimbursements.

The president instead referred the issue to a referendum, citing public opposition, with the vote scheduled for March 6 and opinion polls foreseeing a rejection of the legislation.

"The main issue for us is to lower the whole repayment cost for Iceland and to finish this matter as soon as possible," Sigfusson said Monday after a meeting between the government and opposition political parties.

"We only have a few days to finish this debate."

Under the British-Dutch offer, according to a source quoted by Dow Jones Newswires, Iceland would pay the 3.8 billion euros to Britain and the Netherlands but would have a seven-year grace period.

Instead of charging a fixed interest rate, Britain and the Netherlands would agree to a floating rate, which they argued would reduce the burden on Iceland.

"If we agree on variable interest rates, than we would have to negotiate also on what the overhead would be," Sigfusson said.