President of Iceland, Olafur Ragnar Grimsson, has announced his intention to reject the new Icesave Bill which was passed by parliament just before the New Year. It is his intention to send the law to a national referendum as soon as possible.
Under Icelandic law, the President’s decision means that the law will go into force as the government planned; but crucially that it will be withdrawn again in the event of the Icelandic public voting ‘no’, whenever the referendum goes ahead.
The only other time the Icelandic President has chosen not to sign a bill into law, the government then decided to withdraw it altogether instead of sending to a national vote. The cabinet is meeting at the moment to discuss the implications of the President’s decision and what to do next.
It was widely thought that Grimsson would accept the law and political commentators remain split on what the actual consequences will be now that he has decided the opposite.
An end to IMF cooperation with Iceland, an end to the EFTA agreement, the break up of the government and even trade sanctions are among possible consequences; but there could equally be no serious consequences.
A response is expected from British and Dutch authorities, probably later today.