Icelandic voters will go to a referendum to decide whether the country will repay five billion dollars to UK and Dutch investors who lost out when the island’s banking sector collapsed.
Icelandic President Olafur Grimsson has called for a referendum to decide if the country should repay savers in the UK and the Netherlands who lost out when Icelandic bank accounts collapsed.
A bill, dubbed ‘Icesave’ after the failed private investment firm in question, was due to be signed on Tuesday and would have seen the Icelandic taxpayer reimbursing five billion dollars to luckless investors.
But because the bill was vetoed at the last minute, the decision will be in the hands of Iceland’s voters for a referendum decision.
It is only the second time in the Icelandic republic’s 65-year history that the president has vetoed a bill at the last minute.
The move to block the bill came after 60,000 Icelanders – a quarter of the country’s voters - signed a petition calling for the Icesave bill to be blocked.
EU membership in jeopardy
Icelandic critics say Britain and the Netherlands are using their EU veto and IMF voting power to bully the country's taxpayers into reimbursing savers who imprudently poured money into Icesave, a private firm that offered high interest rates.
But supporters of the bill say that failure to pass it through risks jeopardizing much needed aid as well as the country’s aspirations to join the EU.
Prime Minister Johanna Sigurdardottir said the government was committed to honouring its debts. She questioned whether the president had the right to force a referendum on such matters but did not suggest the government would try to avoid one.
"It is debatable whether it is politically and constitutionally correct for the president to use his right to submit the issue to a national referendum when it concerns an international issue such as Icesave where the government seeks to honour its international commitments," she said.
Ms Sigurdardottir’s government had threatened to resign if the bill was not passed, throwing the country into yet more uncertainty as preparations are made for a referendum to take place.
Reactions from the UK and the Netherlands
The Dutch government said it was "very disappointed" and would demand an immediate explanation.
British Finance Minister Alistair Darling called on Iceland to honour its debts, especially in light of the country’s aspirations to become a full member of the European Union. Since the financial crisis - which hit the small island nation harder than most - EU membership has been high on Iceland’s priorities.
"An agreement has been reached with us and the Dutch government and I really think it should be implemented because otherwise I think it will just make things far more difficult than they need be," Darling said.
Britain and the Netherlands have veto power over Iceland's EU membership bid and could block the entry negotiations.
Date created : 2010-01-05