Icelandic voters unlikely to approve Icesave deal

Reuters News
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Posted: Apr 09, 2011 7:25 AM
Icelandic voters unlikely to approve Icesave deal

By Anna Ringstrom and Omar Valdimarsson

REYKJAVIK (Reuters) - Icelanders began voting on Saturday whether to approve a plan to repay debts to Britain and the Netherlands with opinion polls suggesting another rejection, dampening hopes for progress in the island's economic recovery.

The plebiscite is on an agreement to repay a $5 billion debt incurred after Britain and the Netherlands repaid depositors who had lost money in online savings accounts. The "Icesave" accounts were run by Landsbanki, one of three Icelandic banks that collapsed in 2008.

Dispute over repayment soured relations between the small North Atlantic island nation, whose economy went into deep recession amid the bank crisis, and the two other countries.

Icelandic lawmakers in February backed the repayment plan agreed with the creditors in December but the president refused to sign the bill, triggering today's referendum.

The three most recent opinion polls showed of those who had made their decision, between 52 and 57 percent, oppose the deal which the government says is better than one overwhelmingly rejected in March 2010.

"It's a definite 'no'," said Kristjan Johansson, a 63-year-old opera singer. "There is no way we should be paying for the debts of scoundrels still living in luxury."

Jon Bergsson, a 38-year-old carpenter, on the way out from a polling station in Reykjavik, said he had voted "no." "This debt has nothing to do with me," he said.

The share of undecided votes is around 15 percent of those who responded to opinion polls.

Prime Minister Johanna Sigurdardottir said on Thursday a 'no' vote would cause economic uncertainty for "at least the next one to two years," although her center-left coalition has not said it will resign if the vote goes against it.

Arni Sveinsson, a 34-year-old film director, will vote yes. "Many Icelanders' stance is very emotionally driven, they say 'we have paid enough'. And I too don't want to pay," he said.

"But I want us to move forward, not be stuck in this limbo for years more. The deal is fair in many ways and we need to pick our fights. For Iceland to be taken seriously we need to get past this," he said.

RESORT TO COURTS?

"We now have the option to settle this unfortunate affair with dignity and honor, or to embark on a new journey into uncertainty," Finance Minister Steingrimur Sigfusson told Iceland's state broadcasting organization late on Friday.

If Icelanders turn down the new Icesave deal, the dispute may instead be solved in a European court, a solution some economists say would be much costlier.

The referendum, in which 230,000 voters can take part, began at 9 a.m. (0900 GMT) and ends at 10 p.m. (2200 GMT).

The government and economists say solving the Icesave issue will help Iceland get back into financial markets to fund itself after a financial rescue programme, led by the International Monetary Fund, runs out this year.

It will also help the country of 320,000 people remove controls on capital flows it imposed in 2008 to stabilize its tumbling currency.

The controls have left an estimated 465 billion crowns ($4.10 billion), equivalent to a quarter of the island's gross domestic product, in the hands of foreign investors, many of whom are expected to want to pull out as soon as capital controls are lifted.

Iceland last month outlined a cautious plan to relax the capital controls gradually, a process expected to take years. The main steps will take place only once Iceland has shown it can refinance loans in foreign credit markets.

(Editing by Andrew Dobbie and Mike Nesbit)

($1=113.31 Iceland Krona)