Iceland is under renewed pressure to pay back billions of euros in compensation to Britain and the Netherlands over its failed savings banks.
Following the president’s decision not to sanction the repayment of nearly 4 billion euros, the country now faces a referendum on the issue.
The European Commission is warning that Iceland’s decision could have grave consequences over financial aid and lead to its isolation.
Its spokesman, Amadeu Altafaj, also made it clear that the way Reykjavik handles the Icesave question could affect the assessment of its EU membership bid.
Iceland’s parliament will meet on Friday to plan a referendum on the controversial Icesave bill.