Iceland's NO VOTE on billions of Pounds lent by Britain and Holland

The people of Iceland delivered a crushing no vote last night in a referendum on the repayment of billions of pounds lent by Britain and Holland to compensate depositors in a failed Icelandic bank.
A higher than expected 93% of voters backed the government’s hard line in a vote that attracted a surprising near-60% turnout. People relished a rare opportunity to deliver a direct verdict on the conduct of their government in the country’s first referendum since independence in 1944. Both Johanna Sigurdardottir, the prime minister, and her minister of finance, Steingrimur Sigfusson, abstained from voting. President Olafur Ragnar Grimsson voted but declined to say where his sympathies lay.

Sigurdardottir’s government is in theory committed to the repayment deal. But she is demanding an apology from Britain because it used anti-terrorism legislation to freeze the financial assets of Landsbanki after the bank’s Icesave investors were denied access to their money.

At issue in the referendum is the £3.48 billion lost by more than 400,000 savers when Icesave failed in October 2008. The British and Dutch governments covered these losses but want the money back from Iceland.

In the eyes of Icelanders facing repayments equivalent to more than £10,000 a head, their economy will be crippled for decades by the burden. But without an agreement, Iceland will be unable to raise loans from the International Monetary Fund (IMF) or succeed in its bid for fast-track membership of the European Union.

“Our politicians stole our banks and bankrupted them and us in the process,” said Hjortur Hjartarson, a communications manager who had voted no. “This is the first time the public have had the feeling that they have a say in what is going on.”

Another no voter, Bjarni Hardarsson, a bookseller from the town of Selfoss, reflected the anger of many at Britain. “What we have here is the reckless abuse by the old colonial powers with no moral conscience at all,” he said. “There’s a lack of both legal and moral grounds for the nonsensical claim that Icelanders alone are responsible for the debt.”

Iceland’s parliament narrowly approved a deal in December but in January, citing mass public opposition, Grimsson refused to sign the bill into law and triggered the referendum. For this he has become a national hero.

Many believe the government privately wanted a no vote to strengthen its hand in talks in London, which are expected to resume this week. Gunnar Helgi Kristinsson, professor of politics at Iceland University, said: “Sigurdardottir is hoping for an overwhelming no vote, as well as a low turnout at the polls, in order to improve her position in the negotiations.”

Sigurdardottir claimed last week that Britain and Holland were “holding Iceland hostage” in the talks by blocking any further aid from the IMF.

She is also confident that a deal can be done. “The impact on our economy and business is already too high,” she said.

Her government is facing a daunting economic crisis. About £900m of foreign debt must be repaid next year.

“We could survive those payments with the resources we have, but we’d have little left for anything else,” said Gylfi Magnusson, the economic affairs minister.