Iceland returns to negotiating table on debt repayment dispute

Icelandic officials have restarted negotiations with their counterparts from Holland and the UK over $5.3 billion owed to investors from the two countries following the collapse of Landsbanki in 2008.

A fortnight of talks ended in deadlock last week, but the sides have returned to the negotiating table to thrash out a deal.

Time is running out before a referendum takes place in Iceland on Saturday (March 6th 2010) on whether the state should foot the bill for repaying foreign investors.

With a 'no' vote thought to be likely – a move that could lead to the International Monetary Fund withdrawing its financial support of the Icelandic economy – an agreement is desperately being sought to avoid the complications that will be caused by the referendum.

Steingrimur Sigfusson, Iceland's finance minister, told the Financial Times: "It is very important that both sides keep lines open so we do not make this mess any bigger."

The prospect of a referendum was triggered in January after the country's president Olafur Grimsson refused to sign a parliamentary bill to repay the debts.

He said that it was important the people of Iceland had a say in the decision.

Iceland's president refuses to sign repayment bill

Iceland's president Olafur Grimsson has refused to sign a bill to repay more than $5 billion to British and Dutch investors who lost money in the country's failed banks.

It is only the second time in the country's history that the president, a largely symbolic figurehead, has refused to sign a bill into law, reports Reuters.

Under the state's rules, the bill will now be put to a nationwide referendum.

The bill was passed by the nation's parliament in an attempt to improve Iceland's international standing as financial aid is vitally needed to help the country recover from its financial meltdown.

But many voters were angered by the decision, leading Mr Grimsson to make his stand.

"The people must be convinced that they themselves determine the future course," he said. "The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery."

There is great anger against the UK for using anti-terror legislation last year to freeze Icelandic assets at the height of the crisis, reports the Telegraph.

Almost 50,000 people in the country, around 25 per cent of the adult population, have signed a petition calling for the bill to be scrapped.