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Iceland's president blocks UK, Dutch compensation

Iceland's president blocks UK, Dutch compensation

Iceland's president on Tuesday blocked a bill to pay Britain and the Netherlands $5.7 billion for losses from the collapse of one of its banks, potentially undermining the crippled North Atlantic nation's attempts to repair international relations.
Olafur Ragnar Grimsson vetoed the legislation, which was passed last month by the country's parliament, after receiving a petition signed by a quarter of Iceland's population of 320,000.
His decision _ only the second time since Iceland's republic was founded in 1944 that the president has not signed into law a bill approved by parliament _ automatically triggers a national referendum on the issue, if the government does not drop the bill.
"It is the cornerstone of the constitutional structure of the Republic of Iceland that the people are the supreme judge of the validity of the law," Grimsson said in a statement, adding that a referendum would be held "as soon as possible."
The Icelandic government said it would review the decision but added that it remained "fully committed" to implementing the bilateral loan agreements, stressing they are an "integral part" of the country's economic program as it struggles to recover from collapse.
The Icelandic parliament had engaged in weeks of heated debate before passing the bill to compensate the British and Dutch governments for the funds they have already paid out to their citizens who lost money when Internet bank Icesave collapsed.
The bill was widely seen as a move to boost the country's hopes of swift entry to the European Union _ talks formally opened last month _ and to aid its economic recovery.
The International Monetary Fund, which along with Nordic countries has promised Iceland $4.6 billion in bailout funds, has said it is keen to see the Icesave dispute resolved, but has not made payment an outright condition of the rescue package.
The Nordic countries, however, have made resolution of the dispute a condition of their support.
After making bilateral agreements with both Britain and the Netherlands, the bill linked repayments to economic growth, beginning in 2016 and preserved the island's right to legally challenge its payment obligation.
But public opposition has been strong, with critics arguing that it would force Iceland to make repayments it could not afford.
Ordinary Icelanders are also still stinging from the British government's decision to invoke anti-terrorist legislation to freeze the U.K. assets of Landsbanki, the parent of Icesave, at the height of the crisis.
Britain argued that it was necessary to ensure the money that British savers had placed in Icesave accounts, which were only available in Britain and the Netherlands, would not be whisked back to Iceland. But Iceland's prime minister at the time, Geir Haarde, blasted the move as an "unfriendly act" and blamed the decision for inspiring panic that led to the subsequent collapse of another of the country's three major banks.
Britain's Treasury office said Tuesday that it would consult with Iceland to "understand why this bill has not been passed and will work with them, The Netherlands and within the EU to resolve this issue as soon as possible."
"The U.K. government expects Iceland to live up to its obligations," it added.
A similar statement from the office of Dutch Finance Minister Wouter Bos said he expected a "quick explanation" of the next steps, adding that "the lack of a solution for Icesave is unacceptable."
Grimsson acknowledged that the recovery of the shattered Icelandic economy "is a matter of vital urgency" and that agreement with other nations and cooperation with international organizations would have an impact on that recovery.
However, he added that it has "steadily become more apparent that the people must be convinced that they themselves determine the future course."
"The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery," he added.
Iceland was an early victim of the credit crunch, which sent its debt-fueled economy into a tailspin. Its three leading banks all failed within the space of a week in October 2008. The value of the country's currency has since plummeted, while unemployment and inflation have soared.
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AP Business Writer Jane Wardell reported from London. Associated Press Writer Mike Hague contributed to this report from The Hague, Netherlands.


Updated : 2021-10-17 17:09 GMT+08:00