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• Hundreds in Reykjavik protest foreclosures
• Iceland cuts interest rate 0.75 points

REYKJAVIK (AFP) - Icelandic Prime Minister Johanna Sigurdardottir vowed her government would help people in deep debt after thousands protested against a wave of home foreclosures, reports said Tuesday.

"I am holding up a white flag, so to speak," Sigurdardottir told the DV daily, a day after up to 8,000 people gathered in front of parliament, protesting the debt many Icelanders still find themselves holding in the fallout from the country's economic collapse in 2008.

Some 200 police officers were called in as Monday's demonstration escalated, with protestors throwing eggs, glass bottles and rocks, injuring several police officers and breaking windows in the Althingi, or parliament.

A six-month freeze on mortgage repayments put in place by the government expired last Thursday, triggering the anger of many Icelanders who will fall short on home repayments.

The daily Morgunbladid said that about 400 homes face foreclosure this year, bringing the total to around 1,000 since October 2008 when Iceland's banking system collapsed and dragged down the economy with it.

According to Thordur Bjorn Sigurdsson of political party The Movement, nearly 40,000 households are unable to make their mortgage payments.

"It is incredibly important, and I think it is the demand from parliament, that we work together and find solutions for those people who are drowning in debt," Sigurdardottir told DV.

"What is the most memorable from Monday is of course the amount of protesters outside," she said, adding that "us on the inside are aware that there is a lot of unhappiness and anger that is simmering among the public, and it is our job to take that seriously."

Sigurdardottir told parliament on Monday that "we have a choice -- line-up, dig out our own graves and let anger lead the way, or work our way, together, out of the problem."

There have been numerous calls for new elections, including from Bjarni Benediktson fo the opposition Independence Party.

"It is time that the left-ruling government realises that its time is over. They had ... an opportunity to fix this nation's problems. They have failed," he said in parliament.

Sigurdardottir said she would not stand in the way of new elections if it was clear such a move would benefit the country but stressed that her government did not plan to "drop our responsibilities in regards to finishing what we started."

Iceland's economy all but collapsed after its major banks went under at the end of 2008. It is now receiving aid from the International Monetary Fund.

The parliament last week voted to send former prime minister Geir Haarde before a special court over his role in the crisis.

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