Iceland PM to trust voters with Icesave decision

Fri Jan 8, 2010 1:36pm EST
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By Omar Valdimarsson

REYKJAVIK (Reuters) - Iceland's prime minister said on Friday she was ready to put her trust in the voters to ratify a deal aimed at repaying Britain and the Netherlands more than $5 billion arising from the country's banking collapse.

Reaching agreement with the two European Union countries is vital for the continued flow of aid to Iceland, still in the grip of a devastating recession after its 2008 financial meltdown.

But Icelandic President Olafur Grimsson unexpectedly refused to sign an amended law this week on repayment, citing a wave of popular anger over the bill. Under Iceland's constitution, his move has forced a national referendum on the bill.

Lawmakers came back to work on Friday, nearly three weeks ahead of schedule, to thrash out the date and wording.

"I have full trust in the Icelandic voters and know that they will make the right decision," Prime Minister Johanna Sigurdardottir said in parliament.

The president's move wreaked political turmoil and forced Icelandic officials to plead with Nordic creditors for continued support. The country's neighbors are part of a multilateral aid program led by the International Monetary Fund.

Finland, Norway and Denmark all repeated on Friday that a condition for their loans is that Iceland meets its international obligations.

Icelandic Finance Minister Steingrimur Sigfusson, speaking from Copenhagen after a meeting with his Danish counterpart, promised Reykjavik would live up to all its commitments.   Continued...