A finitely generated, locally indicable group with no faithful action by C¹ diffeomorphisms of the interval

According to Thurston's stability theorem, every group of C^1 diffeomorphisms of the closed interval is locally indicable (.e., every finitely generated subgroup factors through Z). We show that, even for finitely generated groups, the converse of this statement is not true. More precisely, we show that the semi-direct product between F_2 an Z^2, although locally indicable, does not embed into Diff_+^1 (]0,1[). (Here F_2 is any free subgroup of SL(2,Z), and its action on Z^2 is the projective one.) Moreover, we show that for every non-solvable subgroup G of SL(2,Z), the semi-direct product between G and Z^2 does not embed into Diff^1_+(S^1).