ICELAND’S President Olafur Grimsson has refused to sign into law a bill to repay more than $5bn (£3.1bn) that was lost by British and Dutch savers when the island’s banks collapsed.
The country’s parliament initially passed the bill on New Year’s Eve but the President’s move yesterday now means that under the constitution a referendum must be held.
Grimsson was petitioned by more than 60,000 voters – almost a quarter of Iceland’s population – demanding that he refuse to sign the document on the grounds that the cash-strapped nation could not afford it.
The British and Dutch governments have already partially compensated more than 320,000 savers who lost money when Landsbanki, the parent of online bank Icesave that failed in October last year.
Grimsson said: “The cornerstone of Iceland’s constitution is that the nation is the highest judge for the validity of law. Now the nation has the power and the responsibility in its hands.”
Iceland’s parliament had approved the bill by a narrow majority of 33 votes to 30.
In August a poll showed that 70 per cent of the country’s population were against paying up.
Chancellor Alistair Darling said it was vital for Iceland’s economic future and credibility that the Icesave compensation was repaid.
TIMELINE | ICELAND’S FINANCIAL CRISIS
• 6 October 2008
Icelanders give the government sweeping powers over its banks as it faces bankruptcy.
• 7-9 October - The government puts Landsbanki, the island's second largest bank by value, in receivership.
Also takes control of Glitnir and Kaupthing, its biggest bank.
• October - A diplomatic row breaks out between Iceland and Britain over hundreds of millions of pounds of British deposits trapped in collapsed Icelandic banks.
• 19 November – The IMF approves a $2.1 bn loan for Iceland.
• 1 February 2009 - Iceland names an interim centre-left government which promises to rebuild the economy.
• 6 June - Iceland agrees to reimburse Britain and the Netherlands compensating people holding Icesave accounts at Landsbanki.
• 17 July - Iceland applies to join the EU
• 30 December - Parliament approves an amended bill to repay more than $5bn (£3.1bn) lost by savers in Britain and the Netherlands.
• 5 January 2010 – President blocks bill and a referendum must now be called under the Icelandic constitution.