REYKJAVIK, Iceland (AP) — The Icelandic government introduced a bill Friday on holding a national referendum over repayment of $5.7 billion demanded by Britain and the Netherlands for depositors’ money lost in failed Icelandic banks.
The government was forced into organizing the public vote after Iceland’s President Olafur R. Grimsson refused to sign legislation on the repayment into law.
That set off a diplomatic clash with Britain and jeopardized crucial bailout funds promised by the International Monetary Fund and Nordic countries.
With Parliament recalled for an emergency session on the referendum bill, Finance Minister Steingrimur Sigfusson was due to meet with his counterparts in Denmark and Norway in a bid to persuade them not to pull the plug on the much needed $4.6 billion rescue fund aimed at helping the island nation out of its financial collapse.
Grimsson said his decision — only the second time in Iceland’s history that a president has vetoed a bill passed by Parliament — would restore “reconciliation and harmony” in Iceland where many ordinary Icelanders blame a handful of “venture Vikings” for the boom and subsequent collapse of its banking sector in 2008.
But the move has pitted the government, which argues that the so-called Icesave bill is necessary for the country’s future economic survival, against the president and some opposition lawmakers.
Opponents say it’s unfair to have to repay both London and the Hague the funds they used to compensate their citizens who had accounts with online bank Icesave, a subsidiary of Icelandic bank Landsbanki that was available only in Britain and the Netherlands.
The bill was amended after discussions between the three countries, and oppolents claim the Icelandic government was strong-armed into even stricter terms, including extending the time limit of the repayment guarantee and removing Iceland’s right to challenge the payment under international law.
“I’m against the law, against the deal, which has been made under duress,” Bjarni Benediktsson, the leader of the opposition Independence Party, told Parliament during debate on the referendum bill.
A “no” vote from Iceland’s 243,000-strong electorate would have the effect of reverting to an earlier version bill as law, likely leading to further talks between all three countries to reach a mutually acceptable deal.
Benediktsson said the government should pursue those talks as a priority “to try and see if our contracting parties are willing to play fair.”
“Now is the chance to stand together,” he added.
The bill introduced Friday gave no firm date for the referendum, but said that it would take place as soon as possible and no later than March 6. It added that the government will advertise the date of the poll no later than three weeks before it is scheduled to take place.
The government had previously pegged Feb. 20 as a tentative date.
Iceland and Britain backed away from a full-blown diplomatic war on Thursday over Grimsson’s move.
A day after Britain warned that Iceland risked becoming an international pariah, Icelandic Foreign Minister Ossur Skarphedinsson said he had received assurances from his British counterpart David Miliband that Britain would not block Iceland’s entry to the European Union in retaliation.
AP Business Writer Jane Wardell contributed to this report from London.