Almost a quarter of Iceland's voters have signed a petition against paying back money lost by foreigners as a result of the collapse of one of the island's main banks in 2008, casting fresh doubt over the country's bid to join the EU.

Last week saw Iceland's parliament narrowly pass a new bill to pay back €3.8 billion to the UK and Netherlands, but the country's President, Olafur Ragnar Grimsson, refused to sign the legislation shortly before receiving the petition on Saturday (2 January).

Plans to compensate British and Dutch savers who lost money in October 2008 when their accounts with the online savings account Icesave were frozen, following the collapse of the parent company Landsbanki, are deeply unpopular in Iceland.

A poll taken last August showed 70 percent of the Icelanders were against the payback deal which would see each citizens of the island's 320,000 citizens contribute 12,000 euro, with many saying they are being made to pay for the mistakes of bankers and regulators.

But the payback deal with the UK and Netherlands is seen as crucial to the Iceland's prospects of joining the European Union, although support for joining the bloc has waned considerably since an initial surge in membership enthusiasm was prompted by the financial crisis.

More than 56,000 citizens signed the petition urging Mr Grimsson to refuse to sign the legislation approved by parliament last week, with Magnus Arni Skulason, one of the organisers of the petition, comparing the repayment to financing the country's health service.

"The interest rate on the Icesave agreement for Iceland is like running the National Health Service of Iceland for six months," he told the BBC.

The Icelandic government has been struggling since June to reach an acceptable agreement to compensate the UK and Dutch governments who both reimbursed their citizens who lost their savings when Icesave collapsed.

Amendments to an original August agreement were rejected by the UK and the Netherlands, forcing a fresh vote. Under the new deal the money would be gradually repaid over a period running until 2024.

EU Observer