Iceland: “We will not pay for the bankers’ crisis”

Nearly two thirds of Icelanders say ‘No!’ to Icesave deal

With 59.8% voting ‘No’ in Saturday’s referendum, Icelanders for the second time have declared they will not pay for the banking crisis. The total cost of the Icesave deal was €4 billion, equivalent to half of Iceland’s total yearly economic activity.

‘Icesave’ was the name used by a large Icelandic bank – Landsbanki – for getting money through accounts set up in Britain and the Netherlands in which small savers and local governments were promised high returns on their savings. When the country’s huge credit bubble burst in the Autumn of 2008, the savers’ money disappeared. The governments in London and The Hague then guaranteed to make up the money to the lenders but the Cameron government still wants the Icelandic government to pay the money it has paid out because of the failings of one of its private banks.

There was, and is, a distinct attempt to play off one set of tax-payers against another – the Icelanders against the English and Dutch. The referendum was about the Icelandic government getting the money out of the pockets of the working population to pay for the failings of a private profit-making bank. No wonder the decision went against them for a second time!

Already a year ago, Icelanders voted ‘No’ to a similar proposal. Then it was a massive 93% of voters who voted against. This time round, the interest rate proposed for repayments had been lowered from 5.55% to 2.64%. The Social Democrats, who lead the minority government in Iceland, were behind the agreement as well as the largest opposition party – the Independence Party.

The Alltinget (parliament) voted in favour of the agreement by a two-thirds majority.

But outside the parties, discontent continued to ferment. When the crisis originally broke out, the then government fell and major protests took place. There were almost permanent protests and a ‘Parliament of the Streets’. This time, the president once again felt the pressure from below and refused to sign the agreement, forcing a referendum. Two of the Green Left ministers quit the government for the same reason.

Four billion euros is half the annual GDP of Iceland and would take 46 years to pay back with the revised three percent interest rate. Now the government says that the Landsbanki bankruptcy agreement can cover most of the amount, attempting to say the taxpayers would not carry the cost. But if there is any money in Landsbanki it should be used against the crisis in Iceland, not to pay for the bank’s speculation.

But it has not convinced the Icelanders. Why should they pay any more for the bankers’ crisis? Cuts and unemployment have already taken a heavy toll. Iceland’s economy has been two years in recession. The rating agency, Moody’s, is about to lower the country’s bonds from "junk" to "non-investable". The Swedish-language writes that predictions point to "Yet another budget with cuts and tax increases".

The authority with the responsibility of reviewing the EU’s free trade arrangements with Norway and Iceland – The European Free Trade Association’s Surveillance Authority – now wants to pull Iceland up before the European Free Trade Agreement Court in Luxembourg. The ‘No’ victory in the referendum may also lead the IMF to make sharper demands on  Iceland for continued payments of the loan which was made during the crisis of 2008. The Icelandic government is now using capital controls to prevent money leaving the country. It could come under pressure from the population to refuse to pay any debts.

President Ólafur Ragnar Grimsson said the referendum showed up "a rift between the government and the people". But the Social Democratic prime minister, Johanna Sigurdardottir, has declared that the government will not resign. The Social Democrats also want to continue to press for EU membership, although achieving this is even less likely after the referendum.

The voting at the week-end underlines the continued dissatisfaction and anger in Icelandic society. A number of new parties have been formed in recent years, but they have not responded to the needs of the people. In the municipal elections in Reykjavik the new ‘Best Party’ had a big success, winning the mayor’s position, but almost immediately began new cuts, contrary to their voters’ expectations.

Iceland needs a fighting socialist party that can show the way forward – to fight against the government, the banks’ owners, and the demands of the IMF and EU. The defiant vote in the referendum, in spite of not having such a clear alternative, indicates the potential for a fight back by workers and young people. It needs to be followed up with mass mobilisations – strike action and street protests. But already their example can act as an inspiration to workers and youth in Ireland, Greece, Portugal and the rest of Europe in the fight against capitalism and the policies of austerity. In turn, victory in these countries is vital for success of the battles in Iceland. Bankers and bosses cannot be allowed anywhere to make workers and ordinary people pay for the crisis of their system.

  • Refuse to pay the debts of the banks and the country
  • Let the people decide how to run the country and the economy! Full state monopoly and control of capital and foreign trade. Nationalise the major finance institutions and dominant capitalist concerns under democratic workers’ control and management – For a democractically planned economy.
  • For a mass workers’ party with a democratic socialist programme, linking up internationally the struggle against the bankers and capitalism

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April 2011