Iceland govt seeks revision of Icesave bill on debt to avoid divisive referendum

Iceland holds talks to avoid referendum on debt

LONDON — The Icelandic government held emergency talks Tuesday to come up with an agreement on repaying British and Dutch investors $5.7 billion so it can avoid a divisive referendum on the issue.

A spokesman for Icelandic Prime Minister Johanna Sigurdardottir said the country’s leading political parties had agreed to work together to revise terms for the disputed payment to the two countries over a failed Icelandic Internet bank.

The dispute has jeopardized Iceland’s bid to join the European Union and threatened crucial bailout funds for Iceland promised by the International Monetary Fund and Nordic countries.

The government was forced into organizing the nationwide vote, which must be held by March 6, after President Olafur R. Grimsson last week refused to sign the so-called Icesave bill.

Grimsson’s decision rode a wave of popular opposition to the bill, named after the high-interest-paying Internet bank that went bust, leaving the British and Dutch governments to fork out compensation for their citizens.

While the government argued that the bill was necessary for Iceland’s economic recovery, opponents were angry that Britain and the Netherlands succeeded in imposing tougher terms on repayment.

If those two countries agree to revised terms that are also palatable to Iceland’s opposition parties, the referendum could be averted — a scenario the government is keen to see.

“There is a lot of activity going on,” spokesman Einar Haraldsson told the Associated Press by telephone from Reykjavik. “The leaders of the political parties met with the prime minister and they decided to make an effort to see if there is an opening for some kind of revision of the settlement.”

Haraldsson did not reveal any details about the new negotiations. The first step is reaching a cross-political agreement in Iceland before then taking it to Britain and the Netherlands.

Icelandic ministers have been in constant contact with their colleagues in London and the Hague, but there has so far been little indication the two countries are willing to renegotiate terms.

Iceland opposition lawmakers were angry over revisions to the repayment deal that toughened the terms, including extending the time limit of the repayment guarantee and removing Iceland’s right to challenge the payment under international law.

Icelandic Foreign Minister Ossur Skarphedinsson told state radio it should become clear in the next couple of days whether a new round of negotiations with the British and Dutch governments is possible.

“The situation is both complex and delicate,” he said after a Cabinet meeting on Tuesday.

Britain’s Treasury Office declined to comment on whether it would be open to renegotiating the terms of the deal, while the Dutch government did not immediately return calls seeking comment.

Opinion polls on the referendum are close. The most recent Gallup poll suggested that 53 percent of Icelanders would back the repayments, 41 percent would vote no and 6 percent would abstain.

Haraldsson said Tuesday the last-ditch talks meant that latest of three dates proposed by the government for the referendum — March 6 — was most likely.