Iceland’s President Olafur R. Grimsson has refused to sign the bill, negotiated under duress, enforcing the payment of £3.5 billion to the British and Dutch governments to refund them for the collapse of Iceland’s deposit insurance fund – 50 per cent of Iceland’s shrunken GDP. Iceland’s government is now to put the bill to a referendum on 6 March.
This is equivalent to a demand for £700 billion from Britain. Iceland’s taxpayers have no moral or legal obligation to pay. Would we agree to refund depositors in foreign branches of bankrupt UK banks? Taxpayers cannot be expected to write open-ended insurance on banks’ foreign activities.
In every civilised country there is a limit to the pursuit of debts. That is why we have introduced limited liability and abolished debtors’ prisons. Combining cross-border banking with generous guarantees to creditors is unsustainable. Brown’s demands are not reasonable. Threatening Iceland with destruction, as Lord Myners has done, is disgraceful, self-righteous bullying.
A poll from MMR found that 58 per cent would vote against the bill, while 42 per cent would vote for it. Can’t pay, won’t pay – right. But for Iceland’s people, voting against the bill will not be enough: they will have to take power to defend themselves against the EU.
Iceland’s Foreign Minister Össur Stropheöinsson warned the British and Dutch governments not to interfere, saying, “Despite the President’s decision, which I deeply regret, it has to be remembered that he exercised his constitutional right.”
President Grimsson said, “You have to trust the democratic process. You see in France, in the Netherlands, in Ireland, in many European Union countries, referendums are a normal part of the democratic process. I know in Britain you don’t really have the experience of trusting the people with a referendum but all over Europe there are countries that trust the people with a referendum ... I thought the new Europe we were talking about was not only about market reforms but also about democracy and the will of the people.”
The banks turned Iceland into a hedge fund, with huge short-term foreign currency liabilities used to finance risky long-term assets. Iceland’s privatised financial sector’s debts grew from twice to ten times its gross domestic product, in five years, so the economy was doomed. Between 2007 and 2010 the fall in real consumption was close to a quarter.