The failure to agree on a repayment programme means Iceland will now be taken to the court of the European Free Trade Association unless a deal can be done quickly.
Iceland’s three main banks all went bankrupt in October 2008. One of them, Landsbanki, ran savings accounts in the United Kingdom and the Netherlands under the name Icesave. When it collapsed, the British and Dutch governments reimbursed 400,000 savers.
The referendum result is the second time the Icelandic people have rejected a repayment deal proposed by their government, this time by 59 to 41 per cent.
The failure of the referendums is because the government urged the Icelandic people to foot the bill rather than use the remaining assets held by Landsbanki to pay off the debt. The terms of the second repayment plan would also have carried a 3.3 per cent interest rate with repayments spread over
30 years.
Landsbanki is said to have assets worth $10 billion, more than enough to cover the debt. Following the referendum result Iceland’s President, Olafur Grimsson, argued against the possibility of a third, saying “before ordinary people are asked to pay for failed banks, the assets of these banks should be used to pay the subs”.
He added that this would mean the British and Dutch governments could still be repaid the money they are owed before the end of 2011.
