**Iceland’s president has announced plans to hold a referendum on the payment of compensation resulting from the collapse of the country’s banks.**President Olafur Ragnar Grimmson said he would not sign a controversial bill to repay $5bn lost by UK and Dutch savers in Icesave accounts.
The government has seen strong domestic opposition to the bill.
The Landsbanki bank, which ran the Icesave accounts, collapsed at the height of the banking crisis in 2008.
The money would have gone to the UK and Dutch governments who compensated Icesave holders following the collapse.
The bill gained parliamentary approval in December, but public opposition in Iceland has grown.
On Monday, the president received a petition against it that had been signed by a quarter of the country’s population.
‘Constitutional crisis’
Announcing the decision to hold a referendum on the bill, President Grimmson said that the Icelandic public had the right to choose.
“It is the job of the president of Iceland to make sure the nation’s will is answered,” he said.
“I have decided… to take the new law to the nation. The referendum will take place as quickly as possible.”
BBC Europe business reporter Nigel Cassidy said it was an astonishing decision.
“It really plunges Iceland into a constitutional crisis,” he said.
He pointed out that Iceland is having to borrow the $5bn needed for the compensation.
“They don’t have the money,” he said.
“They are having to borrow it from the IMF to shore up not just this loan but all kinds of other things, so it puts everything up in the air - not just this but further loans from the IMF and even Iceland’s chances of joining the European Union.”