LONDON (AP) – The Icelandic government held emergency talks yesterday to come up with an agreement on repaying British and Dutch investors $5.7 billion so it can avoid a divisive referendum on the issue.

A spokesman for Icelandic Prime Minister Johanna Sigurdardottir said the country's leading political parties had agreed to work together to revise terms for the disputed payment to the two countries over a failed Icelandic Internet bank.

The dispute has jeopardised Iceland's bid to join the European Union and threatened crucial bailout funds for Iceland promised by the International Monetary Fund and Nordic countries.

The government was forced into organising the nationwide vote, which must be held by March 6, after President Olafur R. Grimsson last week refused to sign the so-called Icesave bill.

Grimsson's decision rode a wave of popular opposition to the bill, named after the high-interest-paying Internet bank that went bust, leaving the British and Dutch governments to fork out compensation for their citizens. While the government argued that the bill was necessary for Iceland's economic recovery, opponents were angry that Britain and the Netherlands succeeded in imposing tougher terms on repayment.

If those two countries agree to revised terms that are also palatable to Iceland's opposition parties, the referendum could be averted – a scenario the government is keen to see.

"There is a lot of activity going on," spokesman Einar Haraldsson told the Associated Press by telephone from Reykjavik. "The leaders of the political parties met with the prime minister and they decided to make an effort to see if there is an opening for some kind of revision of the settlement."

Haraldsson did not reveal any details about the new negotiations. The first step is reaching a cross-political agreement in Iceland before then taking it to Britain and the Netherlands.

Icelandic ministers have been in constant contact with their colleagues in London and the Hague, but there has so far been little indication the two countries are willing to renegotiate terms.