A majority of Icelanders are right behind their President Olafur Ragnar Grimsson's decision to call a referendum on paying compensation to the UK and the Netherlands, suggesting that the vote will be to refuse to pay.
A poll by the newspaper Frettabladid found that some 62.4% of voters agreed with Grimsson's refusal to sign a bill into law  to repay bailout money that was paid by the UK and Dutch governments when the Icelandic banks collapsed.
Icesave, owned by Iceland's Landsbanki, failed in October 2008, leaving the UK Treasury to compensate 300,000 British savers. Iceland has already agreed to cover the first €20,000 (£18,000) per account, while Britain has topped up the rest of the compensation.
But opponents of the repayment deal in Iceland argue that it will make every citizen there liable for £11,000 of debt and the total bill will come to 40% of Iceland's gross domestic product.
Anti-British sentiment was already running high in Iceland  after UK Prime Minister Gordon Brown choose to use the 2001 Anti-terrorism, Crime and Security Act to freeze the UK assets of Landsbanki. This put Iceland on the same list of undesirables as Al Qeada which was widely regarded as a humiliation of a NATO ally and led to allegations that the UK would never have dared to do such a thing to a larger country.
Last week the UK Finance Minister Lord Myners made bellicose noises about the consequences of the Icelandic decision, including hints that it might lead to a possible objection to Iceland's application for European Union (EU) membership. Iceland submitted its EU application in July, in the hope that membership would help stabilise the economy following the October 2008 collapse of its once-booming financial sector
But the rug has been pulled out from under the UK on that front after the Spanish EU presidency assured Iceland that the row will not harm its bid. "The foreign minister of Iceland, Ossur Skarphedinsson, spoke today with Miguel Angel Moratinos, the foreign minister of Spain, which holds the presidency of the European Union," said the Icelandic Foreign Ministry ministry in a statement. "In their conversation, Mr. Moratinos stated that the Spanish EU presidency viewed the Icesave issue and Iceland's EU application as separate issues, and that the new situation that has arisen in Iceland would not have any impact on the EU's treatment of the application.”