Icelandic President Olafur Grimsson has said he would put a new deal aimed at solving a dispute with Britain and The Netherlands over a £3bn (€3.56bn) repayment to a public vote.
Grimsson confirmed he would not personally ratify a plan to repay funds invested by British and Dutch citizens in internet bank Icesave that were lost when it collapsed in 2008.
About 38,000 Icelanders – around 12% of the population – had signed a petition calling on Mr Grimsson to authorise a referendum on the deal. A package with more onerous repayment terms was rejected in a national referendum last year.
Johanna Sigurdardottir, Iceland’s Prime Minister, said she was disappointed and “had expected the president to ratify this.”
Icelandic lawmakers approved the deal at the country’s parliament, the Althingi, last week.
“We will now go ahead and plan for the referendum,” Ms Sigurdardottir said, though it is not yet known when the vote will take place.
Icesave, an online subsidiary of Landsbanki bank, collapsed along with its parent and Iceland’s other major banks in October 2008, leaving 340,000 British and Dutch citizens out of pocket.
Both Britain and The Netherlands reimbursed their citizens’ deposits and have since been seeking repayment from Iceland. The UK is owed about £2.3bn (€2.73bn) in compensation and The Netherlands €1.3bn.
Under the new deal, Iceland would begin repayments in 2016 and finish by 2046, at an interest rate of 3% to the Dutch and 3.3% to Britain. The earlier deal vetoed in a public vote would have charged a 5.5% interest rate.
The latest deal is expected to cost Iceland just under 50bn Icelandic kronur (€0.31bn), with the recovered assets of Landsbanki expected to cover the majority of the debt.
Mr Grimsson told reporters he believed the new proposal was more favourable than the deal rejected by the public last year, and said it was not guaranteed that it would fail to win authorisation.
He said he expected both Britain and the Netherlands to show understanding. “They respect our democratic constitution as they do their own,” he said.
The British Treasury said it was seeking further details. “We look forward to clarification of the Icelandic position in the coming days,” a spokesman said.
Iceland’s failure to settle the dispute has delayed payments from a £2.8bn (€3.32) loan from the International Monetary Fund.
Some legislators believe Britain and the Netherlands could also block Iceland’s application to join the European Union until an Icesave deal is signed into law.