Icelandic President Grimsson: "The view that we will not honour our obligations is completely wrong"
Iceland's president has told the BBC's Newsnight programme that the country will pay its debts to the British and Dutch governments.
President Olafur Grimsson said that Iceland would "honour its obligations", despite effectively vetoing new repayment laws.
On Tuesday, the president called a public vote on a new bill committing Iceland to repaying $5.4bn (£3.4bn).
There has been significant opposition to the bill among Icelanders.
Opponents say the repayment plan could harm the Icelandic economy further, and force taxpayers to pay for bankers' mistakes.
The debt stems from the Icelandic banking crisis in 2008, when the UK and the Netherlands were forced to compensate savers with accounts in Icesave - a subsidiary of the collapsed Landsbanki bank.
Laws already in place
"The view which is being put forward that we will not honour our obligations is completely wrong," President Grimsson said.
He argued that legislation signed by him in September already ensured that Iceland would repay the money.
"The law which I signed in September is based on the agreement that we have made with Britain and the Netherlands, where Iceland acknowledges its obligations," he added.
But this earlier agreement is unlikely to be acceptable to the UK and Dutch governments.
Unlike the later agreement it does not include a sovereign guarantee, committing Iceland to repaying the loan in full.
THE STORY SO FAR...
Early October 2008: Icelandic banks collapse forcing the government to take control
October 2008: Amid a bitter row with Iceland over who should pay, UK and the Netherlands promise to compensate their nationals who have Icesave accounts
November 2008: IMF approves $2.1bn loan for Iceland. Financial support from other countries brings total amount to $10bn
June 2009: Iceland's new government agrees to reimburse UK and Netherlands
August 2009: Icelandic parliament approves first Icesave bill detailing payment schedule
September 2009: UK and the Netherlands reject payment terms following amendments
December 2009: A second bill including sovereign guarantee approved by parliament
January 2010: President calls referendum on second bill
The referendum is currently scheduled for 20 February, according to draft legislation to be discussed by the Icelandic parliament on Friday.
President Grimsson said that it was his duty to ensure that the public will on the matter was followed.
The latest opinion polls suggest the referendum is not necessarily simply a rubber stamp to blocking the bill.
The latest opinion polls, quoted by the Reuters news agency, suggest a lessening of hostility.
Between 51% and 58% are against, down from about 70% formerly.
A successful resolution to the dispute is essential if Iceland is to continue accessing the $7bn of financing from the International Monetary Fund and other Nordic countries.
The funds are seen as crucial to Iceland's economic recovery plan.