Iceland Votes Against Repayment to U.K., Dutch

Iceland on Saturday voted against a referendum to repay funds loaned to them by the British and the Dutch when Icelandic banks collapsed in 2008. The measure was triggered when Iceland’s president refused in March to sign off on a repayment plan agreed upon with Britain and the Netherlands.

Reuters reported that Icelanders were angry that taxpayers were left holding the bag for what they saw as bankers’ irresponsibility. Nearly 60% rejected the measure in the vote, despite its negative implications for the nation’s future. A 28-year-old barista, Thorgerdun Asgeirsdottir, was quoted in the report saying, "I know this will probably hurt us internationally, but it is worth taking a stance," after casting a negative vote.

The debt of $5 billion was run up when Britain and the Netherlands made good on deposits for their citizens on high-interest “Icesave” online accounts owned by Landsbankl, which was one of three banks that collapsed in 2008. This is the second time a repayment plan has been rejected by Iceland, and the current government says it will not resign in the wake of the “no” vote. Instead it said in a statement, "The government will emphasize maintaining economic and financial stability in Iceland and continuing along the path of reconstruction which it began following the economic collapse of 2008."

Now the issue must go before the EFTA Surveillance Authority (ESA), the European trade body that oversees Iceland's cooperation with the European Union (EU). A court determination is expected not only to take longer, but thought by economists to be far more expensive.

Iceland’s president, Olafur Ragnar Grimsson, hailed the vote, saying in a Financial Times report, "The people have now spoken clearly on this matter on two occasions. The leaders of other states and international institutions will have to respect this expression of the national will." Grimsson has twice vetoed the government’s efforts to put in place a payment plan for the debts.

While Prime Minister Johanna Sigurdardottir characterized the vote as a "disappointment," activist Frosti Sigurjnsson said that the greater part of Icelandic voters rejected "the immoral notion that odious private debt can be nationalized as an afterthought."