Iceland's president has refused to sign legislation to reimburse Britain and the Netherlands for nearly €4bn ($5.7bn, £3.6bn) lost in a failed Icelandic bank, threatening to plunge the crisis-hit country into a fresh round of political and economic turmoil. . .

The decision will be a serious setback for Alistair Darling , UK chancellor, who has spent months trying to craft a deal.

British officials refused to be drawn on the likely implications of Iceland abandoning the deal. However, Mr Darling warned on Monday that failure to pass the law would "make things much more difficult".

There is little appetite in Whitehall to further soften the terms of the loan agreement that was already regarded as generous, giving Iceland an effective grace period of seven years to rebuild its economy. 06-Jan-10.

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