Icelanders reject deal to repay British and Dutch

REYKJAVIK (Reuters) – Icelandic voters vented their  fury yesterday at the bankers and politicians who ruined their  economy, overwhelmingly rejecting a $5 billion deal to repay  debts to Britain and the Netherlands, early results showed.

The outcome of the referendum had not been in doubt since  Iceland had recently been offered better repayment terms than  those contained in the deal on which residents were voting.

Partial referendum results from around a third of the cast  votes showed 93 per cent opposed the deal and less than 2 per cent  supported it. The rest cast invalid votes.

But the rejection will still have major repercussions,  keeping financial aid on hold and threatening to undermine the  centre-left government of Prime Minister Johanna Sigurdardottir.

“This has no impact on the life of the government. We need  to keep going and finish the (Icesave) debate. We have to get an  agreement,” Sigurdardottir told public television.

The referendum, Iceland’s first since independence from  Denmark in 1944, was forced by the refusal of Iceland’s  president to sign a law in January on repayment terms negotiated  by the government and approved by parliament.

He cited public anger at the time. Since then, the anger of  the people on this recession-hit island has only grown.

While polls show Icelandic people believe the debts should  be repaid, residents bitterly resent being stuck with a bill for  the mistakes of a handful of bankers under the watch of foreign  governments. The Icesave debts come to more than $15,000 for  each one of the 320,000 people on the island.

The debts arose after Iceland’s top banks all collapsed  within days of each other in 2008, brought down when credit  dried up in the global financial crunch.

Around 400,000 savers in Britain and the Netherlands had  deposits with one of the banks in so-called Icesave online  deposit accounts. The two countries compensated the savers and  since then have demanded their money back.

What makes the impasse all the more problematic is that the  International Monetary Fund is waiting for the affair to be  resolved before resuming financial aid, money which is crucial  if Reykjavik is to rebuild a shattered economy.