Audbjorg Olafsdottir

REYKJAVIK, May 20 (Reuters) Icelandic leaders trying to form a centrist coalition said today they had not yet agreed on how to share out ministries or how to shape big industry, but Prime Minister Geir Haarde was confident of a deal this week.

Haarde, leader of the Independence Party, negotiated over the weekend on a partnership with Ingibjorg Solrun Gisladottir's Social Democrat Party after the collapse of a 12-year centre-right coalition.

The Progressive Party, the governing partner, stepped down after a poor showing in national elections on May 12, opening the way for talks to form a coalition combining the centre-right and centre-left.

''We are very optimistic that we can finish the talks and form a new government within a couple of days,'' Haarde told national radio today.

The leaders conducted their weekend talks in ocean-side valley Thingvellir, where Viking chieftains founded Iceland's parliament, the Althingi, in 930 AD.

The leaders said essentials such as the division of ministries and the future of big industry remained unresolved today but expressed hopes for a wide-ranging deal.

''We are getting along together fine and we are hoping for a soft landing between us on most issues,'' Gisladottir said.

Economists are particularly interested in how the leaders will bridge divisions over the key issue of last weekend's parliamentary elections: The growth of aluminium smelters in the volcanic nation of 300,000 and the plants that power them.

Going into the close-fought vote, the Social Democrats -- along with the Left Green and Icelandic Movement parties -- called for a pause in smelter development to assess the environmental and economic impact of the latest projects.

Independence believes a hiatus would be dangerous for an economy spurred to rapid growth as aluminium giants such as Alcoa built smelters powered by Iceland's abundant geothermal and hydroelectric resources.

Many Icelanders have expressed concern about power-producing dams on rivers and about record-high borrowing costs in a fast-growing economy.

''So far we have not discussed this issue in detail,'' Haarde told national radio yesterday.

President Olafur Ragnar Grimsson has said the parties must form a new government within 10 days.

Gisladottir said last week that if her party chose to compromise on the smelter issue, voters would be informed.

The former Reykjavik mayor and historian, who advocates European Union membership for Iceland, said before the election that the one issue she would never compromise on was giving the poorest a greater share in the country's prosperity.

Haarde, a proponent of corporate tax cuts and a staunch opponent of EU membership, has said the most important goal for Iceland is to spur economic growth.

Reuters SR DB2321