Olafur Ragnar Grimsson, president of Iceland, has stated that his country will honour the debts of failed online bank Icesave, but has also defended the principle of a referendum as a way to give Icelanders the last word.
AFP - Iceland's president defended as "democratic" his decision to veto a compensation deal to cover the Icesave bank collapse, amid anger in Britain and the Netherlands.
President Olafur Ragnar Grimsson also said Iceland would honour its obligations over Icesave, after refusing to sign a bill on compensation for the British and Dutch governments.
"The view being put forward that we will not honour our obligations is completely wrong," he told the BBC's Newsnight programme late Wednesday.
"The only thing that I have decided is to allow the Icelandic people to have the final say in a referendum which is in accordance with our fundamental democratic principles," he said.
Grimsson on Tuesday referred the issue to a referendum, following public opposition to the bill, sparking a political and economic storm, with doubts growing over Iceland's recovery and EU membership bid.
"All over Europe there are countries that trust the people with the referendum. What I decided to do was simply to follow an honoured European tradition of allowing the people to make the final decision."
Grimsson's decision sparked anger in Britain and the Netherlands where officials urged Reykjavik to meet its international obligations after they had to compensate local savers who lost their money in Icesave.
On Tuesday, Fitch credit rating agency downgraded Iceland's long-term debt rating to junk status, from BBB- to BB+, citing a "renewed wave of domestic political, economic and financial uncertainty."
Grimsson played down the move, saying "this credit rating by Fitch has really no practical consequences."
He also appeared to play down warnings from Britain and the European Commission that a 'No' vote at the referendum could jeopardise Iceland's bid to join the European Union.
"The discussion with the European Union will take place in the coming years," he told the BBC.
The Icesave bill, narrowly approved by the Icelandic parliament on December 31, calls for 3.8 billion euros (5.4 billion dollars) to be paid to the British and Dutch governments who had to compensate more than 320,000 British and Dutch savers who lost money in the collapse of the Icelandic bank.
Grimsson said the bill "is based on the agreement that we have made with Britain and the Netherlands where Iceland acknowledges its obligations."
Date created : 2010-01-07