Icelanders reject repayment plan


Voters in Iceland defied their parliament and international pressure, resoundingly rejecting a €3.8 billion plan to repay Britain and the Netherlands for debts spawned by the collapse of an Icelandic bank.

According to results released today, just over 93 per cent of voters said ‘No’ in yesterday’s ballot, while only 1.8 per cent voted “yes,” according to a count of all but 2,500 of the 143,784 votes cast. The rest were blank or spoiled ballots.

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. Ordinary Icelanders say the repayment schedule was too onerous.

The overwhelming margin reflects Icelanders’ simmering anger at bankers and politicians as the island nation struggles to recover from a financial meltdown.

Some Icelanders set off fireworks in the centre of the capital, Reykjavik, as the referendum results were announced.

President Olafur 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 two countries have already offered Iceland more favourable repayment terms than the deal voted on yesterday.

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

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 a wave of popular protest toppled the government.

The new left-of-centre government has been trying to negotiate a plan to repay £2.3 billion to Britain and £1.1 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. 

Last minute talks broke down last week, despite the debtor countries saying they had offered better terms for a new deal — including a significant cut on the 5.5 per cent interest rate in the original deal.

That would have required each Icelander to pay around £88 a month for eight years - about a quarter of an average four-member family’s salary.

Despite the referendum result, both sides said they were confident a deal would eventually be reached.

The Icelandic government said in a statement there had been “steady progress toward a deal” in the past few weeks, and Prime Minister Johanna Sigurdardottir said officials would resume talks with Britain and the Netherlands now that the referendum was over.