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General Information on Iceland

Official Name: Republic of Iceland
Capital: Reykjavik
Government Type: Constitutional republic
Population: 301,931
Area: 39,600 square miles; about the size of Virginia or slightly larger than Ireland
Languages: Icelandic, English, Nordic languages, German widely spoken
Year of Independence: 1918
Web site:

Voters in Iceland Reject Repayment Plan

Published: March 6, 2010

LONDON — Iceland’s voters expressed their outrage on Saturday against bankers, the government and what they saw as foreign bullying, overwhelmingly rejecting a plan to pay $5.3 billion to Britain and the Netherlands to reimburse customers of a failed Icelandic bank.

With all but 2,500 of the 143,784 votes counted, the authorities said, 93 percent voted "no" and 1.8 percent voted "yes" in the first public referendum ever held on any subject in Iceland. The remaining ballots were declared invalid.

But the referendum was more symbolic than substantive, and the Icelandic government hastened to make clear that Iceland would still pay back the money, albeit on different terms from the ones rejected.

“We want to be perfectly clear that a ‘no’ vote does not mean we are refusing to pay,” Finance Minister Steingrimur Sigfusson said. “We will honor our obligations. To maintain anything else is highly dangerous for the economy of this country.”

The vote shows the depth of Icelanders’ rage. They are angry at the British and Dutch, who they say are mistreating them; angry at the regulators and government officials who failed to properly oversee the Icelandic financial system; and angry at the bankers whose recklessness helped the economy grow at a headspinning rate and then caused it to self-destruct in days.

“Ordinary people, farmers and fishermen, taxpayers, doctors, nurses, teachers, are being asked to shoulder through their taxes a burden that was created by irresponsible greedy bankers,” President Olafur Ragnar Grimsson said on Bloomberg Television.

How to repay the debt, which represents more than 40 percent of Iceland’s gross domestic product, has consumed this small, isolated nation for the last year and a half, since its banks failed, its stock market crashed and its currency collapsed.

The money represents a portion of the losses incurred by more than 300,000 Dutch and British customers of Icesave, an Internet branch of the Icelandic bank Landsbanki. The bank went bankrupt in October 2008, along with 85 percent of Iceland’s banking sector. The Netherlands and the British reimbursed their citizens, and are now pushing to get the money back from Iceland.

The three countries have been fighting over the deal’s terms ever since. An agreement this fall that would have given Iceland 15 years to pay the money, at 5.5 percent interest, only narrowly passed the country’s Parliament.

But on Jan. 5, Mr. Grimsson unexpectedly refused to sign the bill into law, setting off the need for a nationwide referendum.

But the vote has been overtaken by events, the government said: the deal at issue in the referendum is no longer the deal that is currently on the table in international negotiations.

Each day of delay increases Iceland’s financial burden. The second installment of a much-needed loan from the International Monetary Fund and a coalition of Nordic countries has been put off pending resolution of the dispute.

Britain has warned Iceland that it risks being an international pariah if it does not pay the money back and has threatened to stall the country’s efforts to join the European Union.

The Icesave matter has put increasing pressure on the year-old Icelandic government, a fragile coalition led by Johanna Sigurdardottir of the Social Democratic Party. On the one hand, it needs to show that it acknowledges the public’s deep bitterness; on the other, it needs to negotiate a deal quickly in order to move economic recovery along.

“We need to keep going,” Ms. Sigurdardottir said in a television interview. “We have to get an agreement.”

Iceland banking crisis news and more

Iceland - a little island in the north atlantic. A little banking problem and more about Iceland

Matthew Lynn says that Iceland should not pay ! video
According to Bloombergs columnist Matthew Lynn ,Iceland should not pay Icesave.
You can see it here on the video , in an interview,before the Icelandic referendum on march 6th.

Know the right people in Iceland ,and you will not have to pay !

Political crisis in Iceland ?
Many belive that there is a political crisis in Iceland now,after the national referendum.

Icelands No,could it spread around Europe ?
Iceland said " NO" on saturday ,against the Icesave agrrement , between Iceland, THe Dutch and Britain.


Iceland braces for consequences of Icesave vote

The Associated Press

Thursday, March 11, 2010 | 12:02 a.m.

A proposal to use taxpayer funds to pay off Iceland's substantial debts to foreign governments seemed likely to be defeated in a national referendum Saturday.

Opinion polls indicated that a strong majority intend to reject the $5.3 billion plan to compensate the governments of Britain and the Netherlands for money those governments paid out to depositors in their countries who lost savings in a failed Icelandic bank.

"I voted no," said Rognvaldur Hoskuldsson, a 36-year-old machine technologist, after casting his vote Saturday morning. "It makes no sense to say yes when the UK and Dutch have put a better deal on the table in talks this week. Also we have to send a message that these countries are not going to profit from this situation."

Many Icelanders who have been badly hurt by the country's financial collapse say they don't want to be bullied by larger nations seeking to profit from Iceland's severe economic problems.

A rejection of the deal because of the public backlash would create another obstacle on Iceland's difficult road out of a deep recession. A "no" vote could further jeopardize its credit rating and make it harder to access much-needed bailout money from the International Monetary Fund.

It could also harm Iceland's chances of being granted entry to the European Union.

Some voters seemed undecided even after the polls opened. Kristofer Hannesson, 27, said he was not yet sure but was leaning toward voting against the plan.

"I feel that I should go and vote no to send the message to the British and the Dutch that we, the innocent Icelandic public, are not going to let them walk all over us," he said.

Iceland has been desperately seeking a revised deal with its European creditors since President Olafur R. Grimsson tapped into public anger and used a rarely invoked power to refuse to sign the so-called Icesave bill into law in January, triggering the national poll.

At the heart of the dispute is the payment of $3.5 billion to Britain and $1.8 billion to the Netherlands as compensation for funds that those governments paid out to around 340,000 nationals with savings in the collapsed Icesave internet bank.

Britain and the Netherlands offered better terms last week _ including a floating interest rate on the debt plus 2.75 percent, representing a significant cut on the 5.5 percent under the original deal hammered out at the end of last year.

The British say their "best and final offer has been turned down."

But Iceland continues to hold out for more, aware that any new deal must win substantial political and public support to avoid another veto by the president.

Locals largely view the deal both as intimidation by bigger nations and an unfair result of their own government's failure to curtail the excessive spending of a handful of bank executives that led the country into its current malaise.

Because of Iceland's tiny population, around 320,000, the original deal would have required each person to pay around $135 a month for eight years _ the equivalent of a quarter of an average four-member family's salary.

That's a step too far for many ordinary Icelanders who resent forking out the money to compensate for losses incurred by potentially wealthier foreign investors who chased the high interest rates offered by Icesave.

There's also residual anger that Britain invoked anti-terrorist legislation to freeze the assets of Icelandic banks at the height of the crisis, prompting the worst diplomatic spat between the two countries since Cod Wars of the 1970s over fishing rights in the North Atlantic.

"I am going to say no on Saturday because it's not fair and justifiable that the Icelandic nation should pay for other people's mistakes," said Benedikt Mewes, 33, a cashier at the National Post Office in Reykjavik.

Officials within Iceland's Social Democrat-Left Green coalition government, whose authority is being challenged by the weekend poll, acknowledge the repercussions of a failure to settle the dispute.

Although the International Monetary Fund has never explicitly linked delivery of a $4.6 billion loan to the reaching of an Icesave deal, it is committed to Iceland repaying its international debt _ the months taken to reach the original Icesave deal were responsible for holding up the first tranche of IMF funds last year.

There are also fears that Britain and the Netherlands will take a hard-line stance on Iceland's application to join the EU and refuse to approve the start of accession talks until an Icesave deal is signed into law.


Associated Press Writers Helga Armadottir contributed to this story.

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