Icelandic Icesave Presidential Veto (2009)

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A petition was submitted to get a Icelandic Icesave Presidential Veto on a controversial law that would approve the allocation of money to repay both the UK and the Netherlands for losses due to the Icesave bank failure.

This measure was defeated


The IceSave bank was an internet bank that failed in 2008, resulting in a loss by the UK and the Netherlands, who are now wanting that money reimburse to them via the Icelandic government. The parliament approved the deal, meaning that each Icelandic resident would then need to shoulder the burden of 12,000 euros which they are trying to prevent with this push for a vote. Nearly 70 percent of residents were against the vote.[1]

A group called In Defense Group had submitted a petition with over 7,000 signatures in order to try to get the president to not sign the controversial Icesave law between the UK and the Netherlands. The want the issue to go to a vote since it would oblige the country to give out financial resources for the program. The problem lies with the parliament, which said it would do everything it could to have the law signed and passed by the beginning of December. The president is not obliged to do as the petition asks.[2] Although there is mounting pressure from the public to put this issue to a vote. Once the parliament has passed it, the option is up to him.[3]


Icesave corporate logo

The Icelandic President said that he would need more time to decide on whether he would sign the approval for the payout or not. He noted that he needed time to consider the petition signed by his citizens but also the approval given by the parliament. UK officials warned that a diplomatic issue could arise if this is not approved. Iceland would need to take out loans from the International Monetary Fund (IMF) and also bilateral loans with other Nordic governments in order to pay back the 3.2 billion Euro debt the would owe.[4] A point the President made that led to his hesitation was that the terms of the repayment were too harsh and would lead the country to financial collapse.[5]

The President decided to let the people decide and put the issue to a vote, he rejected the bill. This is a significant move because this is only the second time a president has vetoed a bill passed by the parliament. Both UK and Dutch banks came out saying they were surprised the President made this move, noting that both countries will want their money back and see it as a foul move by Iceland. Iceland was also in contention for EU membership, many noted that this could harm those chances even further.[6]

Britain said publicly that it expects Iceland to repay the money, regardless of the future vote on the issue. EU law states that Iceland has to repay the money, regardless. The Dutch government backed Britain on the issue as well. Since the issue will be put to a public vote, both countries are unsure how Iceland will manage to repay them but are willing to assist in finding a solution that works for all countries. If the vote does vote against the repayment, the consequences as a reliable international finance partner will be negative. Icelandic President said that the government lays on the idea that the people are the supreme judge of the law.[7]

Path to Vote

The date for the election is tentative, depending on a parliament decision, but thought to be scheduled in late February of 2010. A recent poll suggested that the people would approve the repayment of the money to Britain and the Netherlands, but that they would first want negotiations reopened to create a new deal for repayment by the Icelandic people. The survey suggested that 53% would vote in favor and 41% against.[8]

After the parliament approved the decision to hold a referendum vote, a date was still not decided on, just that it had to be before March 6. The minister of Justice will be the one to ultimately decide the election date. The parliament vote for the referendum was unanimous, minus the 16 members who were not present.[9]

Recent polls again showed that Icelanders were not in favor of repaying the lost money and show that if there is a referendum vote it would most likely be defeated. Most Icelanders cite the large financial burden that would be imposed on them and good enough reason to oppose the vote. Iceland is still trying to negotiate outside of a vote, hoping to make a deal with the various governments, but it is still more likely that a vote will be held.[10]

The date has been set for a vote on the Icesave issue, March 6 is when voters will decide. The vote will be on whether to approve the bill that sets out the payment plan for refunding the moneys lost by Britain and the Netherlands. The plan will be to give 3.8 billion euros to both countries.[11]

While voters still await their vote on the issue, both the Netherlands and Britain have joined together to try and work out a manageable payment plan for Iceland, mainly having a floating interest rate, making it less than previously agreed on. Nothing is set though, the two countries are still in negotiations on the best way to address Iceland. Everyone agrees that Iceland will repay the money, just the time frame and amount remain in question.[12] A revised plan was given to Iceland, but if they will agree on it is yet undetermined.[13]

Iceland is one of the most indebted countries and the IMF warns that if the country is forced to pay back the entire loss to Britain and the Netherlands then what little recovery has been made could be lost. The mood in the country seems to be leaning towards a "No" vote but warnings still emerge that if the country is not able to stand up to its financial obligations they will be isolated. talks to join the EU were also met with cool responses from Great Britain who would only support the countries bid if they could repay what they owe.[14]


This measure was defeated by a large margin with 93 percent of voters against the measure. Icelanders did not want the burden of $16,400 to pay to Britain and the Netherlands. Due to this, Iceland results in serious credit problems with international monetary organizations, but regardless of the vote the Icelandic government is still trying to negotiate with the two countries an easier method of repayment. All three parties stated that they want to reach a settlement that would benefit all involved.[15]

See also