Voters in Iceland on Saturday resoundingly rejected a US$5.3 billion plan to pay off Britain and the Netherlands for debts spawned by the collapse of an Icelandic Internet bank, initial results showed.
Results returned from about 74,150 ballots counted so far in a country of about 320,000 showed that 93 percent of voters said “no” in the referendum, compared to just 1.6 percent who said “yes.”
The referendum results are indicative of how angry many Icelanders are as the tiny island nation struggles to recover from a deep recession.
The global financial crisis wreaked political and economic havoc on Iceland, as its banks collapsed within the space of a week in October 2008 and its currency, the krona, plummeted.
The Icelandic government was the first to fall as a result of the meltdown.
Icelanders were deciding whether to approve the payment of US$3.5 billion to Britain and US$1.8 billion to the Netherlands as compensation for funds that those governments paid to about 340,000 of their citizens who had accounts with the collapsed bank Icesave.
The Icelandic Internet bank had offered high interest rates before it failed along with its parent, Landsbanki.
“This result is no surprise,” Icelandic Prime Minister Johanna Sigurdardottir said. “Now we must turn to the task of finishing the negotiations on Icesave.”
The debt owed to Britain and the Netherlands is a small sum compared with the massive amounts spent to rescue other victims of the global meltdown — US$182.5 billion was paid out to keep US insurance giant American International Group alive — but many taxpayers in the country say they can’t afford to pay it.
The deal would require each person to pay about US$135 a month for eight years — the equivalent of a quarter of an average four-member family’s salary.
Many voters object to the terms of the deal, not the idea of payment itself.
Locals also see the deal as 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.
“I said no,” Palmar Olason, 71, said at a polling station. “We should get a better deal.”
If final results show most voters agreed with him, Iceland’s credit ratings could be jeopardized, making it harder to access much-needed funding to fuel an economic recovery.
Unemployment has surged since the crisis began, to about 9 percent in January, and inflation is running at about 7 percent annually, while the nation’s economy continues to shrink.
Britain and the Netherlands have been pushing hard for repayment and there have been fears that they will take a hardline 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.
About 1,000 Icelanders gathered to protest in downtown Reykjavik on Saturday, demanding a better say in the issue.
Many ordinary Icelanders have said they resent forking out the money to compensate for losses incurred by potentially wealthier foreign investors who chased the high interest rates offered by Icesave.
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