Iceland dissolves EU accession team

"The government is in agreement on this subject. The process has been suspended. But nothing has been closed down, and we will improve our communication and strengthen our ties with the EU without actually joining," he added.

Sveinsson's centre-right and eurosceptic coalition promised to end the EU talks when it took power in April, with its EU negotiators put on prolonged vacation since May.

Iceland launched its EU bid after suffering a financial meltdown in 2009, but the country's economy later recovered and public opinion turned against the EU.

For its part, the European Commission had nurtured hopes that Iceland's new government might change its mind.

Back in July, commission chief Jose Manuel Barroso said the door was still open, but noted that the "clock is ticking."

The main sticking point in EU relations is fisheries.

Reykjavik has insisted on keeping high mackarel quotas amid EU threats to impose trade sanctions.

A meeting on the subject on Sunday in the Icelandic capital failed to reach a compromise.

Iceland has unilaterally issued a quota of 123,000 tonnes of mackerel for this year and demands a 17 percent share of the EU total catch.

During a visit to Brussels in July, its Prime Minister, Sigmundur David Gunnlaugsson, said the EU should try to replenish its fish stocks instead of pressing Iceland to catch fewer fish.

He offered "assistance" on replenishment and urged EU countries to base their arguments on "science," saying that more fish are migrating northward due to warmer seas.