* Bill would allow government to start EU accession talks
* Foreign ministry says expects bill to pass by next week
(Adds PM comment)
By Omar Valdimarsson
REYKJAVIK, July 10 (Reuters) - Iceland's parliament began a final debate on Friday on whether to authorise the government of the economically crippled island nation 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.
"We urgently want the application to Brussels by the 27th of this month in order to have an answer by the end of the year," she told Icelandic television.
She told parliament the island would have fared better in the financial crisis had it been a part of the European Union.
"We are close to a democratic and informed conclusion on this important issue, a conclusion that will no doubt facilitate our economic recovery," she said. "I don't doubt for a minute that we would be better off had we been EU members already when the calamity hit us last October."
EU officials have said member states would probably look favourably on an Icelandic application, and negotiations could move quickly because the country already has strong EU ties.
The resolution in the Althing would allow the coalition of pro-EU Social Democrats and 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.
Arni Thor Sigurdsson, chair of the foreign affairs committee, told Reuters the debates would stretch into the weekend, with an extra parliamentary session on Saturday.
Support for joining the EU has risen in Iceland since 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 accession talks, but powerful interests like the fishing industry oppose the idea, fearing EU membership would entail giving up cherished fishing rights.
"This motion lacks heart. It lacks passion. There is probably love for the EU in some parts, but it is not here," Bjarni Benediktsson, leader of the opposition Independence Party, said in parliament of the government's proposal.
EU membership was the main sticking point between the Social Democrats and the Left-Greens after their April election win, and they 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.
The daily Frettabladid said on Friday the resolution was expected to pass by a narrow margin and estimated 33-35 of the 63 Althing members supported it. It needs 32 votes to pass.
The Social Democrats have 20 seats in parliament and the Left-Greens 14, but the party leaderships say members can vote as they please or abstain.
Parliament's foreign affairs committee has spent weeks securing backing for the government, trying to coax recalcitrant MPs to abandon an opposition proposal.
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, including parliamentary approval of its deal to reimburse Britain and the Netherlands for billions of pounds and euros owed to savers with Icelandic accounts. (Writing by Niklas Pollard)