THE HAGUE (AFP) - The Netherlands said on Friday it was "extremely disappointed" at the failure of talks on how Iceland should compensate the Dutch and British governments for money lost in the collapse of Icesave bank.

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"We are extremely disappointed that they were unable to accept our best offer" for easier repayment terms, Dutch finance ministry spokesman Niels Redeker told AFP.

"Our negotiators returned to the Netherlands very disappointed yesterday. We had put a very reasonable offer on the table."

Iceland's president refused last month to sign a bill to compensate the Netherlands and Britain to an amount of 3.8 billion euros (5.4 billion dollars) following the collapse of the online Icelandic bank in October 2008.

The bill, narrowly approved by the Icelandic parliament on December 31, defines the terms of a payout to London and The Hague for having compensated more than 320,000 British and Dutch savers who lost money.

But the planned reimbursement has stirred up resentment among many ordinary Icelanders hard hit by their country's financial meltdown.

A referendum on the compensation deal is to go ahead on March 6 after Iceland's finance ministry said on Thursday that the latest round of talks had adjourned without resolution.

Opinion polls have predicted a majority 'no' vote.

Redeker said the revised terms in the latest offer would have seen a fixed interest rate changed to a variable rate, "the lowest they would be able to find".

The Netherlands and Britain had also offered to waive interest repayments for the first two years of the loan, a total potential saving to Iceland of 450 million euros (610 million dollars) over the full 15-year repayment period, said Redeker.