POLLS SUGGEST three-quarters of Icelanders will reject a referendum on Saturday on the €3.9 billion Icesave repayment package agreed between their government and the British and Dutch governments. It would saddle every one of them with €12,000 in debt. The package is compensation to both of the latter for their reimbursement of 350,000 investors following the collapse of Landsbanki in October 2008, and was put to referendum by President Olafur Grimsson who opposes the deal.
Last-minute talks between the three parties are continuing. Unlike its citizens, Reykjavik acknowledges the debt but is pressing for an extended payment moratorium and reduced interest charges. Yesterday Foreign Minister Ossur Skarphedinsson expressed confidence a deal will be agreed after the referendum.
Although failure to agree threatens to stall Iceland’s €3.4 billion International Monetary Fund-led bailout, it is not hard to sympathise with Icelandic voters who like their Irish counterparts bitterly resent having to take responsibility for the debts of bankers who took wildly irresponsible risks and which were – at least in part – a result of British and Dutch regulatory failure. The principle that taxpayers should cover the losses of banks is not a good one.
The European Commission, meanwhile, gave a welcome nod last week to the opening of accession talks with Iceland, a decision likely to be ratified by EU leaders at their summit later this month despite the compensation row. With a fair wind, Iceland could be joining the union by 2012 – probably with Croatia – as the talks should be straightforward. It has been part of the European Economic Area (EEA) for 15 years and so has already taken on a large part of the acquis, the huge volume of shared laws, economic rules and administrative practices that constitute the basis for membership.
The commission expects tough talks over fisheries, the environment, agriculture and, notably, capital and financial services. It also raises questions about eliminating “possible conflicts of interest in Iceland’s public life, such as close links between the political class and the business community”. Iceland is a small open economy with a population of 317,000 and a GDP of €9 billion, 0.08 per cent of the EU, so accession should not pose problems economically. EU entry is seen, particularly by Scandinavians, as a key objective – a bridgehead into the increasingly important, disputed Arctic and control of its mineral wealth and shipping lanes.