Icelanders voted in a referendum today on a $5 billion deal to repay Anglo-Dutch loans, with an expected resounding No set to delay foreign aid, hopes for economic recovery and possibly EU aspirations.
Despite the consequences of rejecting the standing deal, angry Icelanders are intent on voting down a 2009 accord with Britain and the Netherlands they see as too costly. They are also certain they can get a much better deal.
Britain and the Netherlands have already offered easier terms than those included in the deal put to a vote, but Reykjavik has so far held out.
Iceland needs to agree how to pay back its Icesave debts, equivalent to half of the country's annual GDP, to unlock more financial aid from the International Monetary Fund and the Nordic states, and to turn around its shrinking economy.
Some 300 to 400 demonstrators braved the freezing rain and howling wind to protest against the Icesave accord, saying that Iceland should focus on helping its own citizens get through the crisis before repaying foreign obligations.
The ballot gives Icelanders an opportunity to vent anger at what they see as reckless Iceland bankers and politicians who caused the meltdown and now expect taxpayers to pick up the tab. There is also deep rancour over the approach of the British and Dutch governments.
"No Icesave. No traitors in power. The nation is innocent." read one banner. "Save our homes instead," read another in a loud protest reminiscent of the "Pots and pans revolution" which helped bring down the previous Icelandic government a year ago.
Surveys show most Icelanders believe they should pay the Icesave debt but view the current accord's terms as unfair.
"We want to pay our debts, but we want to do it without going bankrupt," said Steinunn Ragnarsdottir, a pianist who voted in Reykjavik City Hall with her two-year-old daughter.
Partial results are expected after polls close at 10pm this evening.
No political parties are backing the Icesave accord agreed in late 2009, not even Prime Minister Johanna Sigurdardottir who brokered the deal. She has vowed to stay on after the referendum and said she would not cast a vote in the ballot.
The Icesave debt amounts to more than $15,000 for every one of Iceland's 320,000 people, though most of the money is likely to be raised eventually by the sale of assets of Landsbanki, which operated Icesave accounts before folding late in 2008.
The focus of the negotiations is therefore the interest on the loan, which Icelandic officials say could knock about $1 billion off their costs.
The Netherlands appeared to harden their position by linking Icesave with Iceland's hopes to join the European Union.
Brussels invited Reykjavik to accession talks last month.
"The situation has changed," Foreign Minister Maxime Verhagen was quoted as saying by ANP news agency today.
"Iceland has launched a referendum and the negotiations went wrong. I see that accession negotiations are an additional tool to enforce the agreement with Iceland," Mr Verhagen added.
Reuters