Iceland voters say ‘no’ to debt deal

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REYKJAVIK, Iceland — Voters in tiny Iceland defied their parliament and international pressure to resoundingly reject a $5.3 billion plan to repay Britain and the Netherlands for debts spawned by the collapse of an Icelandic bank.

According to results released Sunday, just more than 93 percent of voters said “no” in Saturday’s ballot, while only 1.8 percent voted “yes.” The rest were blank or spoiled ballots. The results were based on a count of all but 2,500 of the 143,784 votes cast.

Despite the vote, the Icelandic government said it would continue talks with Britain and the Netherlands on a new agreement.

The two nations want to be reimbursed for money they paid their citizens with deposits in Icesave, an Internet bank that collapsed in 2008, along with most of Iceland’s banking sector. Ordinary Icelanders say the repayment schedule was too onerous. Some blew whistles and set off fireworks in the center of the capital, Reykjavik, as the referendum results were announced.

“This is a strong “no” from the Icelandic nation,” said Magnus Arni Skulason, co-founder of a group opposed to the deal.

“The Icelandic public understands that we are sovereign and we have to be treated like a sovereign nation — not being bullied like the British and the Dutch have been doing.”

The overwhelming margin reflects Icelanders’ simmering anger at bankers and politicians as the island nation struggles to recover from a financial meltdown. President Olafur R. Grimsson, who sparked the referendum by refusing to sign the repayment deal agreed by Iceland’s parliament, said Icelanders resented having to pay for the actions of a few “greedy bankers.”

He said, however, the British and Dutch would get their money back eventually. The two countries already have offered Iceland more favorable repayment terms than the deal voted on Saturday.

“The referendum was not about refusing to pay back the money,” Mr. Grimsson told the BBC. “Iceland is willing to reimburse those two governments, but it has to be on fair terms.”

Iceland, a volcanic island with a population of just 320,000, went from economic wunderkind to fiscal basket case almost overnight when the credit crunch took hold.

After a decade of dizzying economic growth that saw Icelandic banks and companies snap up assets around the world, the global financial crisis wreaked political and economic havoc. Iceland’s banks collapsed within a week in October 2008, its krona currency plummeted, and a wave of popular protest toppled the government.

The new left-of-center government has been trying to negotiate a plan to repay $3.5 billion to Britain and $1.8 billion to the Netherlands as compensation for funds that those governments paid to about 340,000 of their citizens who had accounts with Icesave, an Icelandic Internet bank that offered high interest rates before it failed along with its parent, Landsbanki.

Failure to settle the dispute could have repercussions for Iceland’s economic recovery. The International Monetary Fund has agreed to lend Iceland $4.6 billion, but the agreement is linked to repaying its international debts. The months taken to reach the original Icesave deal were responsible for holding up the first tranche of IMF funds last year.

Last-minute talks on Icesave broke down last week, despite the debtor countries saying they had offered better terms for a new deal, including a significant cut on the 5.5 percent interest rate in the original deal.

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