Icelanders vote 'no' to Landsbanki repayments

Icelanders have voted a second resounding "no" to proposals to repay €4bn (£3.5bn) to Britain and the Netherlands for the collapse of the country's banking system.

When Landsbanki went under in 2008, the British and Dutch governments reimbursed nearly 400,000 people in danger of losing savings held in the Icelandic bank's "Icesave" accounts.

After 60 per cent of Iceland's voters at the weekend rejected a repayment plan, the issue will now be decided by the European Free Trade Association (Efta) Surveillance Authority court.

Danny Alexander, the Chief Secretary to the Treasury, described the outcome as "disappointing" yesterday and said the British Government would continue to pursue the matter. "There is a legal process and we will try to make sure we do get back the money that the British Government paid out," he said.

Jan Kees de Jager, the Dutch Finance Minister, was more strident still. "The time for negotiations is over. Iceland remains obliged to repay," he said. "The issue is now for the courts to decide."

Iceland's Prime Minister, Johanna Sigurdardottir, said yesterday that Icelanders had chosen "the worst option" in rejecting the repayment plan. But Reykjavik also played down the impact of the vote, stressing that the vote would not affect payments to come from the Landsbanki estate to "priority claimants" – including the British and Dutch authorities – which should cover nearly a third of priority claims.

The outcome of the referendum could have serious consequences for Iceland. It is already struggling to rebuild its economy in the aftermath of the financial crisis, having been forced to accept a $4.6bn (£2.8bn) bailout from the International Monetary Fund (IMF) and put in place capital controls to protect the krona. And the Efta court could take several years to reach a verdict.

In the meantime, prolonged uncertainty over Icesave will hamper economic recovery, undermine the country's ability to borrow on the financial markets, and increase the likelihood of another credit rating downgrade. Fitch Ratings has already cut Iceland's rating to "junk'" status, after the first referendum rejection, and Moody's warned in February that it would follow suit if the second referendum also came up with a "no".

In an effort to reassure the market, Reykjavik yesterday stressed its continuing commitment to the IMF-backed programme, emphasising that the country would still have "no difficulty" covering its debts in the years ahead, despite the referendum.

The 'no' vote also has significant political implications, with the dispute causing continuing friction with Britain and the Netherlands and raising the chances that one or the other might veto Iceland's bid to join the EU.

The first attempt at a repayment deal – specifying an interest rate of 5.5 per cent to be paid over eight years - was rejected by 93 per cent of Icelandic voters in March last year.

Under the second proposal, Iceland was to pay over 30 years from 2016, with a 3.3 per cent interest rate to Britain, and a 3 per cent rate to the Netherlands.

The deal had the backing of the Icelandic parliament, which hoped to draw a line under the dispute. But the President, Olafur Ragnar Grimsson, refused to sign it, triggering a second referendum.

Iceland's government says the cost to taxpayers will be far less than the €4bn headline figure and could drop to below £200m once the assets of Landsbanki have been sold.

But the country's "no" campaigners maintain that taxpayers are not liable for losses incurred by a private bank. Of the 230,000 Icelanders eligible for the referendum, 169,000 voted.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Parts Advisor

£16500 - £18500 per annum: Recruitment Genius: One of the leading Mercedes-Ben...

Recruitment Genius: Software Developer

£27500 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Telemarketers / Sales - Home Based - OTE £23,500

£19500 - £23500 per annum: Recruitment Genius: Experienced B2B Telemarketer wa...

Recruitment Genius: Showroom Assistant

Negotiable: Recruitment Genius: This global company are looking for two Showro...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor