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Iceland’s president defends repayment decision

Iceland’s president Olafur Ragnar Grimsson has defended his decision not to repay Britain and the Netherlands the £3.5bn lost by savers in Icelandic banks.

According to an interview in the Financial Times, Grimsson acknowledged the issues caused by refusing to approve legislation that would pave the way for reimbursement to British and Dutch governments, but says he was living up to Iceland’s tradition as one of the world’s oldest democracies in referring the issue to a referendum next month.

He said: “The Icelandic constitution is based on the fundamental principle that the people have sovereignty. It is the responsibility of the president to make sure that the will of the people will prevail.”

Iceland’s governnment reiterated that it remained committed to repaying the money following talks between UK chancellor Alistair Darling and his Icelandic counterpart.

Both Britain and the Netherlands have both hinted at potential repercussions if Iceland rejects the deal, with its bid to join the European Union and the £6.2bn rescue plan led by the International Monetary Fund being touted.

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