Tags: Iceland Rejects Debt Deal for Collapsed Bank

Iceland Rejects Debt Deal for Collapsed Bank

Monday, 08 March 2010 09:29 AM

Icelanders blew whistles and set off fireworks in the capital as weekend referendum results showed they had resoundingly rejected a $5.3 billion plan to repay Britain and the Netherlands for debts spawned by the collapse of an Icelandic bank.

Voters in the tiny Atlantic island nation defied both their parliament and international pressure to display their anger at how their nation was being treated.

"This is a strong 'No' from the Icelandic nation," said Magnus Arni Skulason, co-founder of a group opposed to the deal. "The Icelandic public understands that we are sovereign and we have to be treated like a sovereign nation — not being bullied like the British and the Dutch have been doing."

Despite the vote, all three governments promised to work on a new agreement between Britain, the Netherlands and Iceland, which is depending on international assistance to help drag itself out of an economic morass.

"It is not a matter of days or a few weeks, but it is important that we do it as quickly as possible," said Icelandic Finance Minister Steingrimur J. Sigfusson.

The Dutch Finance Ministry said it and Britain were committed to finding a solution, and British Treasury chief Alistair Darling said his country was prepared to be flexible about repayment terms.

Britain and the Netherlands want to be reimbursed for money they paid their citizens with deposits in Icesave, an Internet bank that collapsed in 2008, along with most of Iceland's banking sector. Most ordinary Icelanders feel the repayment schedule was too onerous.

More than 93 percent of voters said "no" in Saturday's ballot, while only 1.8 percent voted "yes," according to official results. The rest were blank or spoiled ballots. The results were based on a count of all but 2,500 of the 143,784 votes cast. Bad weather delayed ballot boxes from remote northern areas from reaching the capital, Reykjavik.

The overwhelming margin reflected Icelanders' simmering anger at bankers and politicians as the country struggles to recover from a financial meltdown. President Olafur R. Grimsson — who sparked the referendum by refusing to sign the repayment deal agreed by Iceland's parliament — said Icelanders resented having to pay for the actions of a few "greedy bankers."

He said, however, the British and Dutch would get their money back eventually.

"The referendum was not about refusing to pay back the money," Grimsson told the BBC. "Iceland is willing to reimburse those two governments, but it has to be on fair terms."

Iceland, a volcanic island with a population of just 320,000, went from economic wunderkind to fiscal basket case almost overnight when the credit crunch took hold.

After a decade of dizzying economic growth that saw Icelandic banks and companies snap up assets around the world, the global financial crisis wreaked political and economic havoc. Iceland's banks collapsed within a week in October 2008, its krona currency plummeted and protests toppled the government.

The new left-of-center government has been trying to negotiate a plan to repay $3.5 billion to Britain and $1.8 billion to the Netherlands as compensation for funds that those governments paid to around 340,000 of their citizens who had accounts with Icesave, an Icelandic Internet bank that offered high interest rates before it failed along with its parent, Landsbanki.

Failure to settle the dispute could have repercussions for Iceland's economic recovery. The International Monetary Fund has agreed to loan Iceland $4.6 billion, and the agreement is linked to repaying its international debts.

There also have been fears that Britain and the Netherlands would block Iceland's application to join the European Union until an Icesave deal is signed into law.

Last-minute talks on Icesave broke down last week, despite Britain and the Netherlands making a significant cut on the 5.5 percent interest rate in the original deal. That would have required each Icelander to pay around $135 a month for eight years — about a quarter of an average four-member family's salary.

Many Icelanders remain angry at Britain for invoking anti-terrorist legislation to freeze the assets of Icelandic banks at the height of the crisis.

"I voted 'no' because I feel that the U.K. has to take some responsibility itself for the Icelandic banks having failed," said 33-year-old engineering student Runolfur Oskar Einarsson.

Darling struck a conciliatory note Sunday.

"You couldn't just go to a small country like Iceland with a population the size of (the English town of) Wolverhampton and say: 'Look, repay all that money immediately,'" he told the BBC. "So we've tried to be reasonable. The fundamental point for us is that we get our money back, but on the terms and conditions and so on, we're prepared to be flexible."

© Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

1Like our page
Icelanders blew whistles and set off fireworks in the capital as weekend referendum results showed they had resoundingly rejected a $5.3 billion plan to repay Britain and the Netherlands for debts spawned by the collapse of an Icelandic bank. Voters in the tiny Atlantic...
Iceland Rejects Debt Deal for Collapsed Bank
Monday, 08 March 2010 09:29 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved