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One in four Icelandic voters oppose UK compensation deal

Around a quarter of voters in Iceland signed a petition against a bill to repay £3.4 billion (3.8 billion euros) lost by savers in Britain and the Netherlands when the country's banking system collapsed, it emerged today.

The petition urged Icelandic President Olaf Ragnar Grimsson to veto the legislation and demanded a referendum on the issue.

The Treasury would recoup up to £2.3 billion from Iceland under the measure, after it stepped in to compensate British depositors with the Icesave scheme.

About 298,000 British savers had their accounts in the bank frozen in October 2008 following the collapse of its parent company Landsbanki.

Earlier this week Iceland's MPs backed the amended Icesave bill to reimburse Britain and the Netherlands by a narrow margin of 33 votes to 30.

There has been strong opposition to the bill in Iceland amid fears that the country can not afford repayments.

More than 56,000 people - around 23% of the country's voters - signed the petition calling on the president not to sign the bill, it was reported.

UK savers, the vast majority of whom have already received their money back in full, had about £4.56 billion held in Icesave accounts.

The payment to savers was split between the Icelandic government, the FSCS and the UK. The British government initially stumped up Iceland's share.

In August, the Icelandic parliament agreed to pay up to £2.35 billion to the UK and £1.14 billion to the Netherlands, effectively turning the bailout into a loan, which will be repaid over 15 years from 2016.

But the British government was concerned about uncertainties over the sovereign guarantee on the loan and the new vote earlier this week meant that Iceland's assurance is now unconditional.

Iceland will initially use assets from the collapsed bank to cover the cost of the repayments, with any additional sums covered by the state.

The Financial Services Compensation Scheme (FSCS) had returned £3.9 billion of savers' money by the end of March this year.

Iceland agreed to pay back the first 20,887 euros (£18,505 at today's exchange rate) that people lost, with the FSCS topping this up to £50,000 and the Government covering sums above this amount to ensure no savers lost money.

The £660 million that had yet to be repaid in March was held in fixed-term accounts. These savers will receive their compensation around the time their accounts would have matured.