Iceland’s banks: Too big to save

Iceland’s voters on April 9 rejected a demand by the British and Dutch governments that Iceland taxpayers pay what their citizens lost in the collapse of Icesave, a private Icelandic bank.

This was the third time an agreement was rejected by one side or the other. The British and Dutch governments first rejected an agreement with Iceland’s government after Althing, the Icelandic parliament, had amended it. The second agreement was overwhelmingly defeated by 93 percent of Icelandic voters in the Icesave referendum of March 2010. (www.advice.is)

The amount in question is 10 times Iceland’s annual gross domestic product.

Iceland is a small country abutting the Arctic Circle in the middle of the Atlantic Ocean, deforested and wracked by volcanoes and earthquakes. While it is a well-developed country that manages to feed itself, Iceland is small — around 320,000 people spread over nearly 40,000 square miles. Its economy is fragile, not particularly rich in natural resources beyond geothermal and hydro power and offshore cod fisheries. It relies heavily on tourism.

Britain has used its terrorism laws to seize Icelandic property to compensate for its Icesave losses; the Netherlands is suing in international courts. The Icelandic government has promised to use what it seized from Icesave after it collapsed to repay Britain and the Netherlands, which are holding out for complete repayment.

“There is no legal basis for the claim against the Icelandic taxpayer,” says lawyer Sigridur Andersen of No-Campaign.

The website asserts that the success of the No-Campaign rested on Icelandic voters accepting the following proposition: “No, illegitimate claims should not be accepted. No, losses due to the failure of banks in the private sector should not be borne by the taxpayer. No, an agreement imposing all costs and risks on one party is unacceptable.”

Faced with demands from two major imperialist countries that would have impoverished its people for decades, demands backed up by economic sanctions, Iceland’s people rejected them.