Iceland Population Votes Not To Pay Back UK and Netherlands - please explain why the population voted as they did

[Earlybird]

I can't fathom their point of view, and feel cranky about it. Isn't it fairly straightforward - the money was loaned, and now it must be paid back?

Why did it go to a public vote, and why did the population vote 'no'?

Do the people of Iceland have a valid point, or are they ungrateful folks we shouldn't rush to help again?

I'm sure it is much more complicated than that.......but how in the world can they say NO?

News story this morning:

'Icelanders have voted overwhelmingly against paying back Britain and the Netherlands for their £3.4bn bailout of Icesave customers after the bank collapsed in 2008. Iceland's government says it will continue to negotiate to pay back the money even though 93 per cent voted 'no' in a referendum.'

I think they voted no to the terms of repayment, rather than voting whether to repay.

I don't know the details, but they obviously feel very strongly about it.

i dont know too much about this, but i think the money we paid was to british people that had their money in t he icesave bank - we didnt bail out their bank, the govt stopped people in this country loosing ther money. our govt didnt have to do this and it did nothing for the people of iceland

Yes, I believe that is right, Nancy. I think they are also still a bit peeved with Gordon Brown for using anti-terror laws to freeze Ice Save assets.

I guess if I was a tax payer in Iceland I would want to know why I had to pay to bail out the British people's investments when mine is still in question.

i can understand the view that it wasn't the people of Iceland's fault that their privately owned banks took deposits that its compensation scheme was too small to cover. To put it into perspective, the compensation scheme in the UK only has £4 billion set aside to cover a bank going bust. Of course, the government could lend it money if necessary.

If there had been lots of foreign investors in RBS abd HBOS, and the British taxpayers were asked to vote on whether we should stump up to compensate them, what do you think would be the result? Seriously, earlybird, you can't have expected any other outcome?

What I don't know is why the British govt (ie us) paid out over the insured level (32K then I think) to people who'd been foolish and greedy enough to invest more than this in an Icelandic (or any other)institution for the sake of an extra fraction of a percent. Did people really not know there was supposed to be a limit on the insurance? Did people with that much money to invest really not have the nous to think for a moment if a tiddly country like Iceland could really support such big banks? (or is my DH exceptional - he wouldn't touch them with a bargepole, luckily for us)

So, you're saying that many British (and people from other countries) invested in Icelandic Banks to get a higher rate of interest, and that the British/Netherlands governments are actually making 'whole' their own citizens?

I was under the impression that the terms of the loan had been agreed to, but now that the bank/deposits have been saved, the Icelandic people/their politicians are now objecting to the terms? is that right?

How did this come to a public vote? And how do they have a leg to stand on?

President Olafur Grimsson triggered the referendum (required by the constitution) when he refused to sign the bill into law.

I don't know what is happening with Icelandic deposits, but it is certainly the stability of their currency that is on the line, and that is why they want to negotiate what they see as a fairer repayment plan.

Earlybird, yes that's right. It would be the same if foreign investors in RBS or Barclays couldn't immediately get their money back in case of a bust and their government instead said it would pay them now and get the money back from the UK later.

The Icelandic parliament approved the deal agreed with the UK and the Netherlands last June but the president blocked it after 25% of the population signed a petition. That's why there was a referendum.

It's really just a protest vote though because a new deal is being worked out with the UK and Holland over the terms of the loan. They have lots of time to repay it, it's just the interest rate that is now up for dispute.

Grimma, i think part of the issue is that the Icelandic scheme only covered up to around EUR20k while the UK by then had upped its scheme to cover up to £50k. Some of the banks were "top up" members with the UK so that the difference between the two figures would be covered by the UK.

It appears some in the UK would have liked an opportunity for a similar vote.

www.citywire.co.uk/personal/-/blogs/money-blog/content.aspx?ID=386480

"Quite why the Icelandic government should be liable for the UK's entirely voluntary decision to bail out Icesave customers is a mystery. Still, it was the use of anti-terrorism laws to seize and freeze Icelandic assets in the UK that was especially disgraceful and, of course, a reminder of how draconian and open to abuse such laws are."
from here

I struggle to disagree with this paragraph.

The icelandic scheme should have paid its 20K euros; the british scheme should have paid the difference up 32K which was what was the limit at the time the investments were made.

I hope that now everyone knows not to invest more than 50K in any one bank.

I dont understand why people think it was "greedy" to invest more than 50K in one bank, instead of splitting it between several. I certainly wasn't aware of the maximum that the government would pay if the bank collapsed, until this recession - and I had more than the maximum in a UK bank for some time (house sale).

I was assuming that everyone did know of the secured limit - in which case the only reason for investing more than this amount in one bank would be to get a marginally higher rate of interest. Of course in the case of a lump sum from something like a house sale its quite difficult to split up into that many chunks so I was probably rather over harsh in that comment.

Because ICESave was not a state owned bank, so the people paying back the money didn't own or run the bank.
Because the British government has lumped the Icelandic people in with 'terrorists'.
Because the Icelandic economy has already been destroyed by the recession and the people don't feel like giving a helping hand to us 'fat cat' Brits.

And the really weird thing, is that apparently an alternative repayment scheme is already being negotiated, so the one in the referendum had been superceded before the voting even began.

Funny thing, perspective - Iceland must be in a bad state if we look like fat cats.

It is unfair on the icelandic taxpayers. Even worse than us bailing the scottish banks - at least we are collectively in possession of a stake of them.

In the US, banks post the maximum insured (USD100K) on the counter or at the drive-through window, in case you were tempted to empty your pockets right there on the spot. Banks there miss no chance to inform customers what the maximum insured amount is.

In the case of Iceland, I think there was a perfectly reasonable feeling that Icesave made its own business decisions without reference to the taxpayers of Iceland, who are now being asked to carry the can for it, and possibly not even on the best terms that can be negotiated.

How do you know which banks in the UK are not owned by the same umbrella bank? Is there somewhere one can find out?

I can understand why they have voted not to. The whole country would go bankrupt and probably revert to third world status.

And I for one would do anything in my power to prevent that happening here. They've only done exactly what we would.

JeMeSouviens you can got the the FSCC website and they will tell you. I'll do a linky.

Sorry FSCS.

Here's a list showing who is owned by who from moneyfacts.

Thanks!

Perhaps the Iceland Bank did things it shouldn't have been allowed to, and perhaps the repayment terms are onerous.......but, don't the citizens/their government bear responsibility for the lack of regulation? They certainly made profits from the deposits when things were going well.....

I'm not suggesting the Icelandic people should be pushed into third world status by debt repayments, but is it right that they refuse to pay? Or is it simply they want to repay in full, but not with what they perceive to be excessive terms?

Are they essentially claiming that Britain and the Netherlands were 'loan sharks in a time of financial crisis'? {only half joking...}

I think it's wrong if they refuse to pay it back ever, but reasonable for them to dictate terms to prevent them going under.

No one was forced to put their money there - they did it because it had the best rate. It was a gamble (although I concede most people would have been unaware). Our (FSA) UK regulations should have been better and so should our awareness of non-UK licenced operations. But hind-sight is a wonderful thing...

Like piprabbit said....I heard that it is not a state owned bank it was private... would we vote to pay a private bank's debt in this country?

I also heard it meant every person in Iceland paying back a lot of money(that was never their money in the first place....).

I heard that a new deal was being negotiated, one that everyone supposedly thinks is better - why vote for a crap deal, when you know negotiations are ongoing for a fairer deal?

That is all I have learned from listening to radio 4, whilst making dc their packed lunches etc.

The basic point is that a nation, no matter how small can be held enslaved by debt.

The people of Iceland did not personally borrow the money. There are relatively few Icelanders and hence the taxes per head would be onerous to pay back this debt. Young Icelanders would just abandon the country. Older icelanders would starve.

It reminds me of the enormous debt imposed on Germany by reparation payments after WWI. Eventually, Germany refused to pay.

I do not blame the Icelanders and frankly we have to be careful that Iceland is not forced into the position that it becomes a failed state. I have heard that Russia is keen to gain influence.

I have a great deal of sympathy for the Icelanders. They have a massive debt created by greedy, careless institutions.

We are however, in a similar situation - we will all personally have to pay thousands of pounds in taxes because of the banking fiasco.

It all seems most unfair.