For the second time, Icelandic voted in a deal to repay both Britain and the Netherlands billions of euros lost in the collapse of the nation of the 2008 island - a popular rejection daring of the notion that taxpayers must bear the burden of the woes of bankers and a risky result will complicate the efforts of the Iceland for reach global markets.
Agency France-Press/Getty Images people celebrate while watching the results in a referendum on whether to approve a renegotiated agreement to compensate for Britain and the Netherlands on the 2008 collapse of Icesave Bank in a bar in Reykjavik Sunday.The money in question, about 4 billion euros ($5.8 billion), has been placed by the British and Dutch depositors in an Icelandic Internet Bank called Icesave and then lost when the operator of the Icesave, Landsbanki Islands, collapsed with the remaining large banks of the Iceland in October 2008.
Almost 60% of 175 000 voters rejected a plan to compensate for the British and Dutch Governments who had intervened to pay their own Icesave depositors when the Iceland deposit insurance plan ran out of money.
The agreement was the result of several months of negotiations that saw the Iceland earn much better conditions for the refund. A prior agreement was demolished — 93% of voters said non - in another referendum, in March 2010.
But the President of the Iceland, ólafur Ragnar Grímsson, February has opposed a parliamentary bill which would have sealed the new deal. That triggered the Saturday referendum. The role of Mr Grímsson is primarily ceremonial and vetoes are extremely rare.
Britain and the Netherlands disappointed and have indicated that they he would fight with the Iceland in court. "The time of the negotiations is completed," said Jan Kees de Jager, Dutch Finance Minister.
Sunday, Mr Grímsson said that Iceland, once again, spoke clearly. "The leaders of other States and international institutions will have to respect this expression of national will," he said. He pointed out that the United Kingdom and the Netherlands, despite the rejection, would receive "huge amounts" of Iceland because countries have claims to the estate of the Landsbanki.
The Iceland is a member of the European economic area, which means he signed many of the Union European financial and trade rules - among them a requirement that countries maintain deposit insurance systems.
The EFTA Surveillance Authority, an organization that maintains the order Iceland, the Norway and the Liechtenstein EEA agreements, already began legal proceedings against the Iceland. Iceland says authority breached the rules by supporting not pas Icesave depositors - and by reimbursing the nationals before foreigners.
The dispute will be heard by the EFTA Court based in the Luxembourg.
The Icelandic Government said, the result of the referendum would delay "by a few weeks" the next assessment by the International Monetary Fund to Iceland progress towards economic recovery. The IMF and the Nordic countries have saved the Iceland with a rescue plan.
The Government has declared the result of the referendum would not affect binding of Icelandic Government payments in 2011 or 2012.
But it seems clear that the Iceland, already isolated by the collapse of the financial system, would remain in a precarious situation. Although the Netherlands addressed the matter Sunday, Britain, or the other country could veto request waiting for the Iceland to join the European Union.
Again, notice of many Icelanders, continuous isolation may be the best solution.
"He is mad that the taxpayer foot the Bill for private enterprises with stranded, said Frosti Sigurjónsson, an Internet entrepreneur who is a spokesman for a group of anti-Icesave." It was abhorrent. We have to say no. ?
Banking disaster in Iceland is widely regarded as the madness of a few financial and a deep resistance to pay their debt.
The banks of the Iceland collapsed in 2008 after years of growth that was dependent on foreign loans. When funding dried up after the collapse of Lehman Brothers, the banks are found short of cash, and the Icelandic Central Bank had little to offer foreign exchange.
The Icelandic Crown sunk like a stone, and Exchange remains limited. Capital controls keep foreign assets to flee the Iceland.
The agreement was rejected Saturday called for the Iceland cover approximately 2.35 billion pounds sterling ($3.8 billion) in payments to the United Kingdom and 1.32 billion euros in the Netherlands - an amount equal to one year and a half about the economic output on the island of 320,000 people. It would have to 2046 to refund the money at an interest rate of 3%.
But the Iceland believes that it will be able to cover 90% of the sum - and perhaps all this - with the proceeds of the sale of the assets of the deceased Landsbanki, and therefore only in a small fraction would directly from the pockets of taxpayers.
-Ainsley Thomson and Archibal Preuschat contributed to this article.Write to Charles Forelle to the charles.forelle@wsj.com
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