Icesave repayment referendum heads for rejection in Iceland
Voters in Iceland go to the polls on Saturday over a deal to pay back billions of euros to the United Kingdom and the Netherlands for the failed bank Icesave, a vote that could have serious implications for the tiny country’s government and its bid to join the European Union.
Polls suggest nearly 80 percent of Icelanders oppose the bill, and Prime Minister Johanna Sigurdardottir has stressed that ongoing negotiations with the UK and the Netherlands may produce a better deal.
“The referendum is meaningless, and in my opinion it will not get us much,” she told RUV television late Thursday. “I am disappointed that the first national referendum Iceland has seen is under these circumstances.”
Icesave, an online bank that offered Dutch and British investors attractive returns, collapsed with its parent bank Landesbanki amid Iceland’s 2008 financial crisis. The Dutch and British governments compensated account holders for their losses, and have demanded Iceland pay a share as well.
Defunct deal
The Icelandic parliament passed the current compensation bill on December 31, but President Olafur Ragnar Grimsson refused to sign it into law and called for a referendum instead.
The bill proposes paying about 3.9 billion euros ($5.3 billion) to Britain and the Netherlands, about a third of the country’s gross domestic product, according to Jon Danielsson, a reader in finance at the London School of Economics.
“Only 300,000 people live in Iceland, so this is coming to about 50,000 euros per family” he told Deutsche Welle. “People would like a settlement that is reasonable and recognizes that all three countries are responsible for what happened.”
The repayment amounts to far less for the UK and the Netherlands than it does for Iceland. And while Britain appears likely to offer a more lenient deal, Danielsson said Dutch media and politicians have become increasingly hostile to Iceland over the issue.
“Because it’s a political issue in that country, a matter of principle for them, they have taken a very hardcore position on this,” he said.
EU bid
The European Commission last week recommended starting European Union accession talks with Iceland, but Britain or the Netherlands are likely to block Iceland’s membership until the Icesave debts are repaid.
Despite the government’s goal of EU membership, support among Icelanders has dwindled amid the Icesave debacle, according to Eirikur Bergmann, political science professor and director of the Center for European Studies at Bifroest University.
“The EU is seen to be backing the UK and the Dutch against Iceland, and therefore that has created a very negative attitude in the country against EU membership,” he said.
Rejection of the bill could also have negative consequences for the country’s center-left government, which has closely aligned itself with settling the Icesave issue, and opposition parties have strongly opposed a repayment plan.
“If the government collapses, any settlement of Icesave is even less likely than before,” said Danielsson. “The other parties that would likely enter into the government are much more adamantly opposed to Icesave than the parties of the left.”
Lack of urgency
While polls show the proposed repayment plan is largely unpopular, a majority of Icelanders do believe the country is ethically bound to repay the debts in some way, according to Icelandic pollster Capacent.
But with better repayment offers from Britain and the Netherlands already on the table, pressure in Iceland to quickly settle the dispute has apparently dwindled.
“We have been living with this situation for 18 months, so a few more months isn’t going to change much for people here,” said Bergmann. “You don’t see riots in the streets or anything like that… The only excitement will be how many people actually show up for this.”
(Source: Deutsche Welle)
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