Referendum due on Icesave pay-out

Icesave's parent bank, Landsbanki, collapsed in 2008

Iceland's parliament has voted to hold a referendum on a controversial plan to repay Britain and the Netherlands over the 2008 collapse of the Icesave bank.

The motion, which was passed unopposed, set no date for a popular vote, but said it should be held by 6 March.

Supporters of the Icesave bill - which had earlier been approved by MPs - say it is essential to restore confidence.

But many Icelandic voters say repayment terms are unfair, and President Olaf Ragnar Grimsson vetoed the bill.

Icelandic views on repaying debt

Forty-nine of the 63 members of parliament voted in favour of holding a referendum by 6 March. No-one opposed the motion, as the 14 remaining MPs were absent.

The bill, narrowly approved by the parliament on 31 December 31, defines the terms of the payout of 3.8bn euros (£3.4bn) to the British and Dutch governments - which had to compensate savers after the Icesave collapse in October 2008.

Opponents say the repayment plan forces Icelandic taxpayers to pay for bankers' mistakes.

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.