Iceland's coalition cools on pledge to hold vote on UK repayment

Fears that government would not survive if, as expected, public strikes down deal to pay back £2.3bn

As Iceland's parliament prepared for an emergency debate this morning over a national referendum on troubled plans to repay a £2.3bn debt to Britain, the country's government voiced its frustration at London's refusal to countenance a new deal.

Iceland is gearing up for the crucial national vote after President Olafur Ragnar Grimsson's refusal this week to sign off on the government's long-awaited Icesave compensation repayment programme, which contained stringent conditions at the insistence of Britain and fellow creditors Holland.

Mr Grimsson proposed a referendum, expected to be held by the beginning of March, to decide the question. Opinion polls this week indicated that about two-thirds of the population would vote against the repayment deal.

But the referendum remains an eventuality that the ruling coalition would rather avoid. Many doubt that the left-wing government could survive if its deal were thrown out.

"If we can do it without a referendum I would prefer that," the Economy Minister, Gylfi Magnusson, said yesterday. "If such a solution can be found and it's palatable to all the parties involved I think everybody would be happy to see the end of this."

But he warned that any such deal would have to avoid reference to a state guarantee, for which a fresh parliamentary Bill would be required.

And while key Icelandic opposition leaders who had previously backed a referendum yesterday gave their support to the idea of finding an alternative solution, Britain and Holland are unlikely to agree to any compromise arrangement over repayment.

Benedikt Stefansson, an adviser to the Economy Minister, said: "One has to be realistic. In spite of the heated debate we had before, the depth of emotion from everyone here, still the British and Dutch government came back with the agreements that we now have in place."

In the absence of any encouraging signs from London or Rotterdam, the Finance Minister, Steingrimur Sigfusson, scrambled to ensure that essential help from Nordic countries would remain in place, setting up meetings today with Danish and Norwegian ministers in a bid to shore up loans that will eventually total €1.8bn. The new setback has refreshed the sense among Icelandic politicians that the harsh conditions set by the British Government last October contributed to the public outcry over the repayment plan.

"We will honour our legal obligations," said OgmundurJonasson, the former health minister who resigned in protest at the terms of the deal, which included interest payments of 5.5 per cent. "We recognise what our capitalists were responsible for. But Britain must take its share of responsibility, too. If there was a will by our creditor nations to strike a new deal, we would be willing to look at that."

The British Government has so far not elaborated on an initial statement expressing "disappointment" at President Grimsson's decision. "We expect Iceland to live up to its obligations," a Treasury spokesman reiterated to CNN yesterday. "We support them in finding a way to do that."

The only chink of light was the reassurance reportedly given to the Foreign Minister, Ossur Skarphedinsson, by David Miliband, UK Foreign Secretary, that there was no question of Britain threatening Iceland's entry to the EU over the affair.

Mr Grimsson had earlier taken to the airwaves in the UK to try to persuade Britain to adopt a more conciliatory approach."I think it's important for Alistair Darling and Gordon Brown to realise that a few minutes after they speak to their home audience in Britain, everything they say is being talked about in Icelandic fishing plants and every village and every office," Mr Grimsson told the Today programme. "If they want a constructive outcome of this dispute, they should be aware every sentence they say will have repercussions on the debate in Iceland."

ebooksAn unforgettable anthology of contemporary reportage
Teeth should be brushed twice a day to prevent tooth decay
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
Those who were encouraged to walk in a happy manner remembered less negative words
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
Renee Zellweger as Bridget Jones
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

IT Project Manager

Competitive: Clearwater People Solutions Ltd: Our client based in Chelmsford a...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

IT Manager

£40000 - £45000 per annum + pension, healthcare,25 days: Ashdown Group: An est...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London