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Demonstrators hold a sign as they join a protest against a government referendum in Reykjavik - Source: Reuters -
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Icelandic voters vented their fury at the bankers and
politicians who ruined the economy, overwhelmingly rejecting a $7
billion deal to repay debts to Britain and the Netherlands.
The outcome of the referendum had not been in doubt since Iceland
had recently been offered better repayment terms than those
contained in the deal on which residents were voting.
Still, the scale of the No vote testified to the anger Icelanders
feel a year-and-a-half after their island's economic collapse
became a symbol of the global financial crisis.
Results from about half of the votes cast showed more than 93%
opposed the deal and less than two percent supported it.
The rest of the ballots were blank or invalid.
Iceland now must go back to the negotiating table with the British
and Dutch in the hope of striking a new accord swiftly.
The longer it takes though, the greater Iceland's financial
pain.
Foreign Minister Ossur Skarphethinsson told reporters Britain and
the Netherlands had indicated they were willing to hold new
talks.
Financial aid has been put on hold during the impasse, which is
also threatening to undermine the centre-left government of Prime
Minister Johanna Sigurdardottir.
"This has no impact on the life of the government. We need to keep
going and finish the debate. We have to get an agreement,"
Sigurdardottir told public television.
Iceland desperately needs to solve the so-called Icesave impasse so
it can get international aid flowing to its economy, which
contracted around 7.7% last year and is expected to shrink again in
2010.
The International Monetary Fund and Nordic countries have promised
to loan Iceland around $6.4 billion to help it kick-start the
economy.
But after initial payments, much of the cash is frozen pending
resolution of the Icesave debt.
Finance Minister Steingrimur Sigfusson said voters had sent a very
clear message about their disappointment and anger.
The referendum, Iceland's first since independence from Denmark in
1944, was forced by the refusal of the country's president to sign
a law in January on repayment terms negotiated by the government
and approved by parliament.
While polls show Iceland's people believe the debts should be
repaid, they bitterly resent being stuck with a bill for the
mistakes of a small number of bankers under the watch of foreign
governments.
The Icesave debts come to more than $US15,000 for each one of
the 320,000 people on the island.
Bank failures
The debts arose after Iceland's top banks all failed within days of
each other in 2008, weighed down by debt and unable to secure
credit during the global financial crunch.
About 400,000 savers in Britain and the Netherlands had deposits
with one of the banks in Icesave online deposit accounts.
The two countries compensated the savers and since then have
demanded their money back.
Turnout was high despite freezing rain and howling winds - not
uncommon for March in a country near the Arctic Circle.
A group of several hundred protesters gathered, saying that Iceland
should focus on helping its own citizens get through the crisis
before repaying foreign obligations.
"No Icesave. No traitors in power. The nation is innocent," read
one banner.
"Save our homes instead," read another in a loud protest
reminiscent of the "pots and pans revolution" which helped bring
down the previous government a year ago.
"We want to pay our debts, but we want to do it without going
bankrupt," said Steinunn Ragnarsdottir, a pianist who voted in
Reykjavik's City Hall with her two-year-old daughter.
Iceland, Britain and the Netherlands started talks on a new deal
once it became clear which way Icelanders would vote.
But a deal has proved elusive. Britain and the Netherlands softened
terms, offering a variable interest rate instead of the relatively
high fixed rate contained in the old Icesave deal.
But Reykjavik held out.
Dutch Finance Minister Jan Kees de Jager said he was disappointed
there was no agreement yet but that he remained committed to
finding a solution.
The Dutch appeared to harden their position by linking the Icesave
dispute to Iceland's hopes of joining the European Union. Brussels
invited Iceland to accession talks last month.
"I see that accession negotiations are an additional tool to
enforce the agreement with Iceland," Dutch Foreign Minister Maxime
Verhagen was quoted as saying by the ANP news agency.
The Icesave issue has rekindled anti-EU sentiment in Iceland.
Support for membership has been falling and is now opposed by more than half of Icelanders.
