ICELAND FACES more economic uncertainty and a drawn-out European court case after its voters rejected for a second time a plan to repay $5 billion (€3.45 billion) to Britain and the Netherlands resulting from the banks’ crash.
The British and Dutch governments voiced disappointment with the result of Saturday’s referendum, in which almost 60 per cent of voters opposed the repayment deal.
“We must do all we can to prevent political and economic chaos as a result of this outcome,” Iceland’s prime minister Johanna Sigurdardottir told state television.
The issue will now be settled by the court of the European Free Trade Association’s surveillance authority, which is overseeing Iceland’s co-operation with the European Union.
“My estimate is that the process will take a year, a year and a half at least,” Iceland’s finance minister, Steingrimur Sigfússon, said.
The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online Icesave accounts owned by Landsbanki, one of three over-extended Icelandic banks that collapsed in late 2008, triggering an economic meltdown in the country of 320,000 people.
Economists have said failure to resolve the issue means Iceland faces delays ending currency controls, boosting investment and returning to financial markets for funding. However, the centre-left coalition government said it would not resign despite the defeat.
“The government will emphasise maintaining economic and financial stability in Iceland and continuing along the path of reconstruction which it began following the economic collapse of 2008,” it said in a statement. It said a fresh round of talks on further funding from the International Monetary Fund, which led a bailout for the island, would be delayed by several weeks, but that it had enough foreign exchange reserves to cover debts maturing this year and next.
The proposed deal at issue in the vote set a timetable for repaying the Dutch and British. Voters rejected the idea that taxpayers should pay for what they see as bankers’ irresponsibility.
Dutch finance minister Jan Kees de Jager said: “The time for negotiations is over. Iceland remains obliged to repay.” – (Reuters)
