Icelanders protest against bill to end EU membership talks

After coming to power last May, the centre-right Progressive and Independence parties froze talks on entering the European Union, and parliament is now considering whether to ditch negotiations altogether - without a referendum that the parties had said would be held.

"It would be awful if this parliamentary resolution of withdrawing from the EU membership talks passed. We could end up as the backwoods of Europe," said pensioner Gudni Johannsson, 68, one of the protesters gathered outside parliament for a second day.

Police estimated the crowd at around 3,000.

Inside, the debate dragged on late into the evening and it looked unlikely that a vote would take place on Tuesday.

Iceland's top three banks collapsed in late 2008 under massive debts, a shock to the island of around 300,000 people that initially boosted support for EU membership as a way to bring economic stability. But Europe's own sovereign debt problems eroded interest in joining the bloc.

The Progressive and Independence parties made big gains in last year's elections as voters, fed up with years of austerity and rising debts, punished the incumbent Social Democrats, handing them the worst defeat of any ruling party since independence from Denmark in 1944.

(Reporting by Robert Robertsson; Writing by Alistair Scrutton; Editing by Robin Pomeroy)