REYKJAVIK - ICELANDIC Prime Minister Geir Haarde told AFP he had no intention of resigning despite mounting anti-government protests over the country's worst ever financial crisis.

'I am not a quitter,' a grave and worn Mr Haarde said at his office in central Reykjavik as the crisis entered its eighth week.

In an interview with AFP, he blamed the crisis on overly aggressive and 'irresponsible' banks and warned that the crisis would get worse before the first signs of a recovery arrived.

Iceland was one of the most prosperous countries in the world until just a few months ago, when its oversized financial sector collapsed and the government was forced to take control of the three biggest banks in October.

The North Atlantic island of just 320,000 people has seen its currency lose almost half its value since January. It has received pledges of almost US$5 billion (S$7.6 billion) in aid from the International Monetary Fund and its Nordic neighbours.

Since the crisis erupted, thousands of people have been laid off and the unemployment rate has risen from one or two per cent in recent years to almost four per cent in early December.

'Unemployment is likely to rise considerably ... But I think as we move through the year 2010 we will see an improvement,' Mr Haarde said.

As the number of jobless has mounted, so has public anger, with thousands of people gathering every Saturday outside the government offices to demand that the government and the governors of the central bank step down.

But Mr Haarde stressed the need for stability 'to lead the country out of the crisis.' An inquiry is currently underway to determine the cause of the banking system's collapse, as well as a separate criminal investigation to determine whether any laws were broken.

'If it turns out ... that the government or I personally have not acted the way I should have, of course I will accept my responsibility. But I will not run away from this problem, just because we have protesters in the streets.'

He did however point the finger of blame at Iceland's banks, which invested aggressively abroad in recent years and were 'probably too aggressive and not cautious enough in their work.

'But I think some actions taken in the banking community could be viewed as irresponsible without them being illegal.' -- AFP