Iceland Voters Set to Reject Debt Deal
The New York Times, March 5th, 2010
After the dust began to settle last year — after the banks failed, the
currency collapsed, the stock market crashed and the government fell —
the dazed inhabitants of
Iceland woke up to
another unpleasant problem:
They owed, it seemed,
some $5.3 billion to more than
300,000 angry people in the
Netherlands
and
Britain.
These were the customers of Icesave, a now notorious online retail
branch of the Icelandic bank Landsbanki, which went bankrupt in October
2008 along with 85 percent of Iceland’s banking system. The British and
Dutch governments reimbursed their citizens, but then demanded that
Iceland repay the money, the equivalent of $65,000 per household here,
plus interest.
To put it in perspective, it is as if American taxpayers were being
forced to pay $5 trillion (plus interest) to reimburse customers of the
Japanese branch of a failed private American bank, said Magnus Arni
Skulason, the head of InDefence, a group agitating for a better deal.
The question of how to pay has convulsed this tiny country of about
319,000 people, severely damaging its international reputation and
paralyzing its economic recovery. It has so incensed its residents that
on Saturday they are expected to reject overwhelmingly the latest
Icesave repayment plan, in the first national
referendum ever held here on any subject.
The vote raises larger questions about Iceland’s place in the world,
said Silja B. Omarsdottir, a political scientist at the University of
Iceland. “Are we going to be a country that takes our obligations
seriously? Or are we going to say, ‘No, we’re going to do things our
way’ and be an international pariah?”
In the scheme of world debt, $5.3 billion is small potatoes. But it
represents more than 40 percent of Iceland’s gross domestic product. The
interest alone would eat up one-fourth of the country’s revenues, said
Prime Minister Johanna
Sigurdardottir, who called finding a resolution to the Icesave
dispute “a matter of life and death for the Icelandic economy.”
The referendum was prompted on Jan. 5 by the
refusal of Iceland’s president, Olafur Ragnar Grimsson, to sign into
law the latest Icesave agreement, arrived at after months of
bad-tempered negotiations with Britain and the Netherlands and narrowly passed by a divided and
fractious Icelandic Parliament.
Mr. Grimsson’s move was unexpected but widely popular in a place that
feels bullied and ill treated.
The crisis spurred a series of demonstrations from usually phlegmatic
Icelanders, who recited poetry and tossed yogurt pots and rocks at
government buildings to protest what they deemed the greed, ineptitude
and spinelessness of the governing elite. Nearly a quarter of the
electorate signed an Internet petition against the Icesave deal.
The referendum is being closely watched abroad, where the worry is that
people in other financially flailing countries might be emboldened to
rise up and refuse to honor financial obligations stemming from the
failures of their banks.
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