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Latest update: 10/04/2011
- financial crisis - Iceland - Netherlands - UK
Iceland voters reject plan to repay bank debt
Voters in Iceland issued a resounding “no” in a referendum on whether to approve a renegotiated deal to compensate Britain and the Netherlands over the 2008 collapse of Icesave Bank, leaving the issue to be settled in court.
By News Wires (text)
REUTERS - Iceland faces more economic uncertainty and a drawn-out European court case after its voters rejected for a second time a plan to repay $5 billion to Britain and the Netherlands from a bank crash.
The British and Dutch governments voiced disappointment with the result of Saturday's referendum, in which almost 60 percent of voters opposed the repayment deal.
"We must do all we can to prevent political and economic chaos as a result of this outcome," Prime Minister Johanna Sigurdardottir told state television.
The issue will now be settled by the court of the EFTA Surveillance Authority (ESA), the European trade body overseeing Iceland's cooperation with the European Union.
"My estimate is that the process will take a year, a year and a half at least, Finance Minister Steingrimur Sigfusson told a news conference.
The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online "Icesave" accounts owned by Landsbanki, one of three overextended Icelandic banks that collapsed in late 2008, triggering an economic meltdown in the country of 320,000 people.
Economists have said failure to resolve the issue means Iceland faces delays ending currency controls, boosting investment and returning to financial markets for funding.
But the centre-left coalition government said it would not resign despite the defeat.
"The government will emphasize maintaining economic and financial stability in Iceland and continuing along the path of reconstruction which it began following the economic collapse of 2008," it said in a statement.
It said a fresh round of talks on further funding from the International Monetary Fund, which led a bailout for the island, would be delayed several weeks, but that it had enough foreign exchange reserves to cover debts maturing this year and next.
Court case ahead
The proposed deal at issue in Saturday's vote set a clear timetable for repaying the Dutch and the British, including interest. But voters rejected the idea that taxpayers should foot the bill for what they see as bankers' irresponsibility.
"I know this will probably hurt us internationally, but it is worth taking a stance," Thorgerdun Asgeirsdottir, a 28-year-old barista, said after casting a "no" vote.
Dutch Finance Minister Jan Kees de Jager said: "This is not good for Iceland, nor for the Netherlands. The time for negotiations is over. Iceland remains obliged to repay. The issue is now for the courts to decide."
Economists have said the court route could be much costlier.
The government still hopes most of the debt will eventually be paid back from the estate of the bankrupt Landsbanki. Ratings agencies were following the vote closely. Moody's had said it might lower Iceland's rating in case of a 'no'.
Standard & Poor's analyst Eileen Zhang said a 'no' vote "might possibly result in a lengthy legal process and further uncertainties regarding the ultimate fiscal cost".
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(99) Reactions
socialists
here is the lesson we need to learn. socialism or it's nicer term social democracy, where people feel they have rights that others should pay for are failures in every form on earth. the sooner they are all gone the better off we will all be. pay for your own life or pay the consequences. government is not your mom
Why should Iceland pay?
When banks crash, the burden is upon the investors and the insurers. To demand payment of the people who happen to live where the bank was located makes no sense. How are the people of Iceland responsible? Was the bank owned by the government and people of Iceland?
Good for them
A measly $5 billion -- they should go get it from the bankers who ran the place. Put all their furniture out front and have a yard sale. That's exactly why government backed banking insurance is a stupid idea.
GO FOR IT!
I wish we in America could tell Obama and Bernanke to quit giving our money to foreign banks for their bailout!
Iceland
Finally, a country that refuses to be bullied by the global banksters! Bravo!
Good for Iceland! They are
Good for Iceland! They are not responsible for the bankster looted there country
This was a private bank, and
This was a private bank, and the voters are right. Just like the US government had no business bailing out private banks and businesses in the US.
Never give in to the mafia
Never give in to the mafia bankers!
The people of the world are with you, Iceland.
Make a stand against these scum-sucking leeches that call themselves bankers.
You don't need them or Wall Street ratings. Start printing your own money and tell the IMF to pound sand!
Iceland citizens stand their ground
Very proud of the citizens of Iceland for taking the stand that the bank is the problem. No citizen should ever have to pick up the tab because the government say's so. Stand your ground no matter the pressure to give in. Replace your leadership if you must but stand your ground.
You spent it, repay it.
Next time you are in trouble......they will let you sink!