Tuesday

21st Nov 2017

Iceland's referendum decision provokes angry UK and Dutch response

Iceland's EU membership bid was seen as at stake on Tuesday after a shock decision by the country's president to block legislation on paying billions of euros to Britain and the Netherlands to compensate investors in the collapsed Icelandic bank Icesave.

In a televised speech, President Olafur Ragnar Grimsson acknowledged the strength of popular opposition to the deal among ordinary Icelanders, many of whom are questioning why they have to pay for the actions of their country's banks. His move means the issue will now be put to a referendum.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Last June, Iceland made an agreement with London and the Hague to pay them back €3.8 billion they used to compensate British and Dutch savers who lost money in October 2008 when their accounts with the online savings account Icesave were frozen, following the collapse of the parent company Landsbanki.

The president said an "overwhelming majority" wanted a direct say over the issue after a petition objecting to the terms of paying back the loan gathered the support of one fifth of the population.

Under the terms of the agreement the loan will be paid back over 15 years with interest, with estimates suggesting every household will have to contribute around 45,000 euros.

Feelings in Iceland have been running high, particularly after the heavy handed tactics at the height of the crisis used by Britain which invoked an anti-terrorism law to freeze the country's assets in the UK.

"It is the cornerstone of the constitutional structure of the Republic of Iceland that the people are the supreme judge of the validity of the law," said Mr Grimsson.

The president's decision, which comes just a week after the parliament narrowly approved legislation to pay back the loan following months of wrangling, has prompted an immediate and angry response.

Fitch, the international rating agency, downgraded Iceland's longterm foreign currency credit rating to junk status on the back of the move and called it "a significant setback to Iceland's efforts to restore normal financial relations with the rest of the world."

The Times newspaper reported that Britain's financial services minister Lord Myners said that if the referendum decision was allowed to stand then Iceland would be frozen out of the international financial system and would not be able to join the European Union.

"The UK Government stepped in to ensure that all retail depositors with Icesave were fully paid out, and now we expect the Icelandic Government to ensure that we are repaid that amount which Iceland owes us," he said.

The Netherlands has also reacted with anger.

"We are very disappointed about the decision," said a Dutch finance ministry spokesman, according to the Wall Street Journal. "Iceland has the obligation to pay back the money."

With the recent petition indicating that Icelanders would likely reject the terms of the repayment in any referendum, the country's EU path is also set to be affected.

Each member state may veto an attempt by another country to join the European Union. Iceland submitted a formal application for membership in July 2009. Once hailed as a probable EU member shoo-in, the banking situation as well as Icelanders more ambivalent feelings about joining the 27-nation bloc is likely to complicate the negotiation process.

Icelanders petition against Icesave payback

Almost a quarter of Iceland's voters have signed a petition against paying back money lost by foreigners as a result of the collapse of one of the island's main banks in 2008, casting fresh doubt over the country's bid to join the EU.

Opinion

EU must confront Poland and Hungary

Curtailing NGOs and threatening judicial independence are the hallmarks of developing-world dictators and authoritarian strongmen, not a free and pluralistic European Union.

Amsterdam wins EU medicines agency on coin toss

The staff of the London-based EMA will move to the Dutch city of Amsterdam after Brexit, following a coin toss. Chance also decided the new home of the European Banking Authority: Paris.

Stakeholders' Highlights

  1. ILGA EuropeFreedom of Movement For All Families? Same Sex Couple Ask EU Court for Recognition
  2. EPSUWith EU Pillar of Social Rights in Place, Time Is Ticking for Commission to Deliver
  3. ILGA EuropeBan on LGBTI Events in Ankara Must Be Overturned
  4. Bio-Based IndustriesBio-Based Industries: European Growth is in Our Nature!
  5. Dialogue PlatformErdogan's Most Vulnerable Victims: Women and Children
  6. UNICEFEuropean Parliament Marks World Children's Day by Launching Dialogue With Children
  7. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  8. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure
  9. Nordic Council of MinistersNordic countries prioritise fossil fuel subsidy reform
  10. Mission of China to the EUNew era for China brings new opportunities to all
  11. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'
  12. UNICEFAhead of the African Union - EU Summit, Survey Highlights Impact of Conflict on Education