On March 7 2010, Iceland held a referendum that
invalidated a proposed settlement for the massive losses incurred by U.K. and Dutch banks triggered by the Landsbanki Islands hf collapse:
Ninety-three percent voted against the so-called Icesave bill, according to preliminary results on national broadcaster RUV. Final results will be published today.
The bill would have obliged the island to take on $5.3 billion, or 45 percent of last year’s economic output, in loans from the U.K. and the Netherlands to compensate the two countries for depositor losses stemming from the collapse of Landsbanki Islands hf more than a year ago. ....
Failure to reach an agreement on the bill has left Iceland’s International Monetary Fund-led loan in limbo and prompted Fitch Ratings to cut its credit grade to junk. Moody’s Investors Service and Standard & Poor’s have signaled they may follow suit if no settlement is reached.
As if the downgrade shouldn't have happened last year.
Dutch Finance Minister Jan Kees de Jager in a statement posted on the Internet last night said he is “disappointed” the agreement hasn’t yet come into effect. The U.K. was “obviously disappointed,” while “not surprised,” said a Treasury official who declined to be identified in line with departmental policy.
....
The Icesave deal passed through parliament with a 33 to 30 vote majority. Grimsson blocked it after receiving a petition from a quarter of the population urging him to do so. The government has said it’s determined any new deal must have broader political backing to avoid meeting a similar fate.
Icelanders used the referendum to express their outrage at being asked to take on the obligations of bankers who allowed the island’s financial system to create a debt burden more than 10 times the size of the economy.
.... The government has appointed a special commission to investigate financial malpractice and has identified more than 20 cases that will result in prosecution.
The island’s economy shrank an annual 9.1 percent in the fourth quarter of last year, the statistics office said on March 5, and contracted 6.5 percent in 2009 as a whole.
Household debt with major credit institutions has doubled in the past five years and reached about 1.8 trillion kronur ($14 billion) in 2009, compared with the island’s $12 billion gross domestic product, according to the central bank.
BBC indicates:
* the Icesave treaty was approved by Iceland's parliament Dec. 2009, with the freeze on compliance called Jan. 2010.
* At stake is how the U.K. and Dutch governments will pass on €3.8 billion/₤3.4 billion of bailout to customers in 2008.
