Icelanders' rejection of a foreign depositor bill complicates the prospect of a settlement and may leave the government unable to resolve a dispute with the UK and the Dutch for another year, Moody's Investors Service said.
"Potentially we could see this dragging on until the middle of 2011," Moody's Senior Credit Analyst Kenneth Orchard said in a telephone interview before the vote. "The voting down of the referendum is going to complicate getting a deal." Ninety-three per cent of voters rejected the so-called Icesave bill in the March 6th plebiscite.
The bill, covering repayment of a $5.3 billion loan, which would saddle each citizen with $16,400 in debt equivalent to 45 per cent of 2009 economic output, sought to cover UK and Dutch depositor claims after the 2008 failure of Landsbanki Islands hf and unfreeze Iceland's international bailout.
Moody's on February 26th said its Baa3 rating, which carries a negative outlook, may be lowered to junk if the issue isn't resolved. "If they don't come to an agreement very soon, then it gets put on hold through the Dutch and the British elections and then you may not see talks back on until this summer," Mr Orchard said.
The krona, which the central bank tries to protect through capital controls, slipped 0.4 per cent against the euro to post its biggest decline since December 11th, and was trading at 174.54 earlier today in Reykjavik.
British and Dutch politicians are preparing for national elections, diverting attention to local issues. The British must go to the polls by June, while The Netherlands will hold early elections on June 9th after its government collapsed last month.
Bloomberg