RIGA (AFP) - Latvia defended ally Iceland on Thursday over a planned referendum on a controversial compensation deal for Britain and the Netherlands for the Icesave bank collapse.

Latvia's Foreign Minister Maris Riekstins rejected the storm of criticism sparked by Icelandic President Olafur Ragnar Grimsson's decision to call a plebiscite.

"Has such response been prompted by the fact that Iceland is a small country? It is hard to imagine that one would hear similar comments, should the move have been made by the president of France, for example," Riekstins was quoted as saying by the Baltic News Service.

Riekstins said it was tantamount to questioning a democratic country's right to respect its own constitution.

Latvia, a Baltic state of 2.2 million people, split from the crumbling Soviet Union in 1991. Iceland, an Atlantic island nation of 320,000, was the first country to recognise Latvian independence that year, and they have had close ties ever since.

Riekstins' spokeswoman noted the minister was not commenting on the politics behind the referendum but simply underscoring the right to call one.

Grimsson announced on Tuesday that he would call a vote, after refusing to sign a bill on compensation for the British and Dutch governments widely opposed by Icelanders.