The “Yes” vote was a paltry 1.5 percent, while 93.6 percent voted “No” on the proposal to pay to the creditor countries a total of $5.3 billion—$3.5 billion to Britain and $1.8 billion to the Netherlands—to compensate 340,000 people who lost their savings in the Icesave bank which failed in 2008.
The new round of talks became necessary after President Ólafur Ragnar Grimsson used his veto power in January to kill the already signed ‘Icesave bill’ to return the money.
Last week, Britain and the Netherlands offered better terms for repayment of the Icelandic debt—a floating interest rate on the debt plus 2.75 percent, which was significantly lower than the originally proposed 5.5 percent last December.
Grimsson saw it as a move in the right direction that better terms had been offered, but still feels there’s a long way to go. “It is encouraging that in the last few weeks the British and the Dutch have acknowledged that that deal, on which the referendum takes place, is an unfair deal,” the president told the BBC.
“All the political parties in Iceland and an overwhelming majority of the people have said they will accept a fair deal. If a new agreement is fair, I don’t think there will be a need for a (second) referendum,” said Grimsson on BBC Radio 4.
While Icesave wasn’t the only Icelandic bank to fail during the fall 2008 global economic meltdown, Britain and the Netherlands became involved when they stepped in to guarantee the deposits of Icesave depositors in their own countries who had lost billions. London and the Hague want their bailout money back from a bankrupt Iceland.
The outcome of the referendum comes as no surprise: If the population had agreed to the payback plan, each of the 320,000 citizens of Iceland would have had to carry debt payments equivalent to $135 per month for the next eight years, according to lawyer Eirigur Svavarsson who heads a group opposed to the plan, reported NPR.
Icelanders who voted “No” say they do not want to give their own money to rich investors who took the risk of depositing their funds in Iceland for higher interest rates.
Public anger against the scheme also comes from the perception that Britain had implemented anti-terrorist legislation, freezing assets of Icelandic banks on its territory during the height of the crisis. This caused the worst chill in diplomatic relations between the two countries since the Cod Wars (also called the wars for the territorial waters) in the 1970s, which involved disputes over fishing rights in the North Atlantic.
The public outcry might put Iceland in a difficult situation, as it is striving to revive the economy, save the banking system, and obtain membership in the European Union. What is more, British and Dutch governments are facing elections this year, so they are not likely to be soft when handling the Icelandic affair. Some fear that Britain and the Netherlands might block Iceland’s accession to the EU until the Icesave debt issue is resolved.
