An astounding 93% of voters reject unfair terms imposed by the governments of the UK and the Netherlands as Iceland takes the lead in following a democratic approach to handling the consequences of the crisis
[Please see statement by Ogmundur Jonasson]
On 6 March, 2010, Icelanders did what no one in the world has done yet. Un-fazed by near-freezing weather and drizzle they went to the polls and let their government and the world know they will not be made to shoulder an unfair and unsustainable burden for the reckless policies of greedy private bankers. They made it clear they refuse to be made Iceslaves by the fallout from the Icesave collapse.
They voted on a referendum on whether or not the Icesave bill approved by a narrow majority in Parliament and vetoed by President Olafur Grimsson, should be enacted. The bill would obligate Iceland to accept the terms set by the governments of the UK and the Netherlands for repayment of the "Icesave Loan Agreement."
Icesave was an online bank set up in 2006 by Landsbanki, a private bank based in Iceland. Icesave offered accounts to depositors in the UK and Holland. These investors were not naive. The fact that Icesave offered high returns on deposits and investments, was a clear signal that their investments were high-risk. As many others around the world, they bought the snake oil of "financial investments" as the path to riches. Like their counterparts around the world, regulators in the UK and the Netherlands allowed Icesave a free hand, as they did their own financial institutions.
After the financial crisis broke, causing a systemic failure of banks in several countries around the world, in October 2008, Landsbanki collapsed.
The governments of the UK and the Netherlands, understandably, chose to compensate those of their citizens whose Icesave investments were at risk. They did so, though, without consulting the government of Iceland. Furthermore, they chose to provide compensation above the levels required by Eu law and EEA agreements. They chose to treat this action as a "loan" to the government of Iceland. The interest rate on this loan of over $ 5.2 billion dollars, forced on the state of Iceland and its people, not contracted by them, is 5.5%, when the base rate in the UK is 0.5%. The Netherlands initially demanded a rate of 6.7%, when that of the ECB was 2%.
The terms of this "loan" would impose a burden of 12,000 euros per Icelander --men, women and children. The total amount being demanded of them is equivalent to 45 percent of the country's economic output last year. This, at a time when their economy is suffering and unemployment is surging. Their economy shrank by an annual rate of 9.1 percent in the last quarter of 2009. Icelanders lost 18 percent of their per capita income, and it is expected that their incomes will further decline by 10 percent in 2010.
With its economy in difficulties, as is that of many other countries, Iceland has been denied loans by the IMF unless it agrees to settle the conditions imposed on it by the governments of the UK and Holland.
The government collapsed and was replaced by a coalition of social-democrats and green-socialists. Throughout the first half of 2009, they engaged in negotiations, and finally came to an agreement that was submitted to Parliament.
During this period, Ogumundur Jonasson, Minister of Health, became an outspoken critic of the policy and tactics of the UK and Dutch governments and the role of the IMF. He insisted that the country could not afford the debts being heaped upon them and pointed to closing hospital wards, rising unemployment and home foreclosures, and a drop of 30% in the disposable income of Icelanders. When members of the cabinet were asked to tow the line, Jonasson resigned and became a leader of the protest movement.
When the bill adopted by parliament was sent to the President, a petition that he veto the bill was signed by a quarter of Iceland's electorate. In response, President Grimsson vetoed the bill, setting the ground for the referendum, as required by the Icelandic constitution.
Jonasson clearly framed the situation as "a dispute between people and capital, property rights and human rights... This is why many people in finance dislike the referendum, because it is symbolic. It is people questioning the rights of capital."
As the results of the referendum were tallied, the silence by the privately-owned news media around the world has been very telling. The people of Iceland have asserted their sovereignty, their autonomy and their democratic tradition. This is a dangerous example and one that is threatening for those who have amassed enormous fortunes, brought havoc to the financial system, disrupted the economies of entire nations, caused suffering to millions and have been rewarded with generous rescue packages financed by taxpayers.
What if people were to decide? What a dangerous idea!
Comments