Reykjavik - Iceland's government survived aother key vote when parliament Friday approved a plan to compensate mainly British and Dutch savers in a failed Icelandic bank.

Parliament, the Althing, has for 10 weeks debated the plan to give an Icelandic state guarantee for the Icesave savings accounts of Landsbanki totalling some 5.5 billion dollars.

"This is one of the largest financial and economic issues ever faced by Iceland," Prime Minister Johanna Sigurdardottir said Friday.

Landsbanki was one of the country's three main banks that were nationalized in October in the wake of the global credit crunch.

Until now the Icebank loans have been covered by the British and Dutch governments.

Earlier this month, Sigurdardottir said Icelanders were "angry" over "the burden of compensation" but were prepared to make sacrifices. The debt was to be repaid over a
15-year period.

The vote was approved by 34 of the legislature's 63 members. Fourteen voted against, 14 abstained and one deputy was absent.

The premier who heads a left-green government said the decision was a plank in the North Atlantic nation's efforts to restore its financial system.

Fulfilling the Icesave compensation plan was also seen as necessary for Iceland to move ahead with its efforts to join the European Union. Last month it handed in its application to join the 27-nation bloc.

Finance Minister Steingrimur J Sigfusson said that while Icesave has been "unsolved it has prevented a lot of other issues to be solved," referring to further loan payments from its Nordic neighbours and a new payment from the International Monetary Fund.

Reykjavik was now to discuss the terms of the Icesave plan with the British and Dutch governments, the premier said.

Iceland's three biggest banks, which were nationalized in the autumn of 2008, have left the country saddled with debts amounting to 10 times its gross domestic product.

The banking crisis triggered an economic crisis which has seen unemployment soar from 1 per cent to nearly 10 per cent, interest rates reach double figures and the national currency, the krona, plummet in value against other currencies. (dpa)