Icelandic voters have rejected a proposed deal to repay Britain and the Netherlands the £3.48 billion lost in the collapse of Icelandic internet bank Icesave. 93.2 per cent voted no, just 1.8 per cent voted yes, and 4.7 per cent turned in an empty ballot. This result sends a message that Iceland’s taxpayers will not repay the debts of a private bank, and will strengthen Iceland’s negotiating position.
Iceland was a nation proud to owe nothing. But then its crazed bankers funded themselves through British and Dutch internet savers chasing unrealistic interest rates, creating a giant debt.
Each Icelander now effectively owes the British people £8,000. It is an IOU that should be owed by a few Icelandic bankers to a few British bargain-hunting savers. Deposit protection and European treaties have remade this into an odious £2.3 billion debt.
Iceland’s banks collapsed at the same time as half the British banking system. The Treasury calculated that the risk to financial stability of letting any British saver lose their money at that time would be too much. So the government repaid the savers, even above the deposit protection limit. It then tapped Iceland for its share, and will get the rest back from banks and our hard-up building societies. Many British building societies have had to pay out millions to fund the failure of a bank that used this same guarantee to acquire deposits at their expense.
So the pain of the Icesave folly has been shared around between Britain’s financial institutions, Britain’s taxpayers and Iceland’s taxpayers.