Iceland passed a law in August to repay more than $5 billion (3 billion pounds) lost in high-interest 'Icesave' accounts, but Britain and the Netherlands baulked at the terms, holding up aid from the International Monetary Fund and other lenders for the island's stricken economy.

Morgunbladid said the proposed changes to the law would mean the government's repayment guarantee will not run out in 2024 with remaining debts needing to be renegotiated at that date, as stated in the old law.

This was the main objection of Britain and the Netherlands.

The Icesave issue has been very unpopular in Iceland and a junior minister has already resigned over changing the law to suit creditors.

Speculation that attempts to pass a new bill could bring down the coalition government have been dismissed by Prime Minister Prime Minister Johanna Sigurdardottir.

The paper said that the leaders of the coalition parties believe they have the necessary majority to get the changes through parliament.