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Iceland's defiant president wins record fifth term

REYKJAVIK (Reuters) - Icelandic President Olafur Grimsson has won a record fifth term in office, riding a wave of support for his defiance of Britain and the Netherlands over massive debts from a bank crash and asserting the tiny nation’s stubbornly independent streak.

Iceland's president Olafur Grimsson and presidential candidate smiles as he waits for preliminary results of the presidential election in Reykjavik, June 30, 2012. REUTERS/Ingolfur Juliusson

A combative former leader of a now defunct left-wing party, he became a symbol of resistance after the 2008 collapse of Iceland’s banks by taking the unprecedented step of refusing to sign into law government bills on repayment of money lost in the crash to its larger European neighbours.

In doing so, Grimsson, 69, emboldened a presidential office that had up until then played a mainly ceremonial role and put himself at loggerheads with the centre-left government as well as international creditors.

Grimsson, who, unlike the government, also opposes joining the European Union, won 52.4 percent of the vote in Saturday’s election to beat his closest rival, television journalist Thora Arnorsdottir, 37, who won 33.4 percent, the tally showed on Sunday after the votes in all but one of six districts had been counted.

Grimsson, who served as finance minister from 1988-1991, was once seen as a cheerleader for the freewheeling overseas expansion of Iceland’s banks but revived his local standing when he resisted international pressure over the debt deals and spoke out against what he saw as foreign bullying of the island.

When the North Atlantic nation’s top banks collapsed in the space of a week in 2008, the country adopted a strategy to compensate local savers but not overseas ones, the bulk of which were British and Dutch depositors.

These countries later demanded repayment of about $5 billion they spent compensating domestic savers, triggering a fierce international row. Twice, deals with the Icelandic government were agreed only for Grimsson to refuse to sign them, sending the unpopular bills to defeat in public referendums.

By effectively vetoing the agreements he broke well over half a century of political tradition and staked out a claim for a much more active and powerful presidential office, a course he pledged to continue if re-elected.

The country of just 320,000 people endured more than two years in deep recession following the financial meltdown, but has since made a surprisingly strong recovery led by its traditional fishing industry and sectors such as tourism.

Still, unemployment remains high and the austerity measures needed to meet the terms of an international bailout received at the height of the crisis has left the established political parties, already tainted by the collapse, mistrusted by many.

The election was a single round and the candidate with the most votes wins a four-year term. Grimsson first became president in 1996.

Reporting by Omar Valdimarsson; writing by Niklas Pollard; Editing by Alison Williams