STOCKHOLM, Jan. 5 (Xinhua) -- Iceland President Olafur Ragnar Grimsson on Tuesday vetoed legislation passed by parliament last week to save the online bank, Icesave.

    Grimsson will send the bill to a national referendum, according to reports reaching here from Reykjavik, capital of Iceland.

    The decision came after more than 62,000 signatures representing a quarter of the nation's voters were presented on a petition urging the president to force a referendum, said the newspaper, Iceland Review online.

    Iceland's Prime Minister Johanna Sigurdardottir expressed disappointment with the decision at a press conference later Tuesday.

    "A solution to the Icesave dispute is a condition for continued cooperation with the International Monetary Fund (IMF) and the disbursement of loans from the Nordic countries," Sigurdardottir was quoted by Iceland Review online as saying.

    The prime minister said the decision upset further disbursement of these loans and the IMF's next review of Iceland's economic stabilization program, and jeopardized the economic progress which the government had made in the past year.

    Althingi, Iceland's parliament, narrowly passed the bill last Wednesday to pay 3.8 billion euros (5.4 billion dollars) to the British and Dutch governments, which had partially compensated more than 320,000 of their savers who lost money in the collapse of the Icesave online bank.

    Icesave, an online subsidiary of the Landsbanki bank, which had to be rescued in October 2008 as the global credit crunch hit, had attracted savers by offering high interest rates.

Special Report:  Global Financial Crisis