Icelanders Vote Down Repaying Icesave Debt for Second Time

April 10, 2011 Updated: October 1, 2015

A man votes at a polling station at Smarinn in Kopavogur on April 9, 2011. About 230,000 Icelandic voters went to the polls Saturday to approve or reject a renegotiated deal to compensate the U.K. and the Netherlands over the 2008 collapse of Icesave bank (Halldor Kolbeins/AFP/Getty Images)
A man votes at a polling station at Smarinn in Kopavogur on April 9, 2011. About 230,000 Icelandic voters went to the polls Saturday to approve or reject a renegotiated deal to compensate the U.K. and the Netherlands over the 2008 collapse of Icesave bank (Halldor Kolbeins/AFP/Getty Images)
AMSTERDAM—Icelanders voted on Saturday for a second time against repaying billions of dollars for the failed Icesave bank to the U.K. and the Netherlands.

Nearly 60 percent this time voted against government plans to repay 3.9 billion euros (US$5.6 billion). In a similar referendum last year, 90 percent of Icelanders voted against the plan.

Icesave, part of Iceland’s second biggest bank Landsbanki, also operated in the United Kingdom and the Netherlands offering online savings accounts at high interest rates. When Icesave went bankrupt in October 2008, hundreds of thousands of British and Dutch depositors lost their savings.

Iceland is obliged by international regulations to compensate depositors through a deposit guarantee scheme. But because Iceland was on the verge of bankruptcy in 2008, an agreement was reached with the British and Dutch governments, whereby those governments would repay the depositors first, and Iceland would repay the British and Dutch governments later. 

However, later still has not come. Icelanders strongly objected to the repayment, arguing they should not be held responsible for paying for the failure of greedy banks. With a population of 320,000 people, the repayment would equal to $15,600 per capita.

Iceland’s Parliament did reach an agreement with the British and Dutch governments earlier this year. The bill, however, was vetoed by Icelandic president, Olafur Ragnar Grimsson who then called for a second referendum on the matter. 

The majority of Icelanders are against repaying the debt, saying the economy is still ailing and the money is needed to buoy the domestic economy. Iceland’s unemployment rate is soaring, currently sitting at about 8.5 percent, whereas it was 1.3 percent in 2007. 

Icelanders in favor of repaying the dept mostly are worried that the refusal to pay could impact the nation’s bid to join the European Union and thus cause heavier economic consequences for the nation.

The Dutch government already announced they would now take the matter to court. The British government is also considering taking legal steps. 

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