* Bill would allow government to start EU accession talks
* Foreign ministry says expects bill to pass by next week
By Omar Valdimarsson
REYKJAVIK, July 10 (Reuters) - Iceland's parliament began on Friday a final debate on authorising the crisis-hit North Atlantic island nation's government to begin accession talks with the European Union.
Prime Minister Johanna Sigurdardottir, elected earlier this year after the previous government fell amid protests over its failure to avert a financial meltdown that has devastated the economy, has made joining the 27-nation bloc a top priority.
The resolution in the Althing would allow the government of Sigurdardottir's pro-EU Social Democrats and the more EU-sceptical Left-Greens to negotiate an accession deal with the bloc which would then be put before voters in a referendum. "I have ascertained that the bill will go through by next week and I hope some of the opposition will support us," Ossur Skarphedinsson, foreign minister and a senior Social Democrat leader, was quoted as saying on daily Morgunbladid's website.
EU officials have said an Icelandic application would probably be looked on favourably by member states and that negotiations could move quickly due to the country's already strong ties to the bloc.
Support for joining the EU has risen in Iceland following the collapse of its main commercial banks and currency in October last year, forcing the country to seek aid from the International Monetary Fund and various European countries.
POWERFUL INTERESTS
An opinion poll in May showed 61.2 percent of Icelanders in favour of embarking on accession talks, but powerful interests such as the island's fishing industry oppose the idea, fearing membership would entail giving up cherished fishing rights.
EU membership was also the main sticking point between the Social Democrats and the Left-Greens as they hammered out policy following their win in the April elections and the parties said in May they had "agreed to disagree" on the issue.
Sigurdardottir and her Social Democrats have said a majority in parliament favours kicking off accession talks despite the wavering support of some Left-Greens.
Icelandic daily Frettabladid said on Friday the resolution was expected to pass by a narrow margin, estimating that 33-35 members of the Althing's 63 members supported it. The resolution requires the support of 32 MPs to pass.
The Social Democrats have 20 seats in the parliament while the Left-Greens, the junior partner in the coalition government, have 14 seats, but the party leadership has agreed to let members vote as they please or abstain.
The parliament's foreign affairs committee has spent recent weeks securing the broadest possible backing for the government resolution, attempting to coax recalcitrant MPs to abandon a rival proposal to hold two referendums on joining the bloc.
The opposition has proposed holding one referendum on whether to apply to the EU and, if Icelanders support that, another on whether to join. The government wants only one vote once it gets a green light from EU member countries.
The resolution is one of several key issues facing the government in the coming days and weeks, such as parliamentary approval of its deal to reimburse Britain and the Netherlands for billions of pounds and euros owed to savers with Icelandic accounts. [ID:nL6500817] (Writing by Niklas Pollard)