Polls suggest that three quarters of Icelanders are expected to vote “no” in a referendum Saturday on a $5.3 billion deal to compensate Britain and the Netherlands for deposits lost in a collapsed Icelandic bank.
The vote will formalize a public backlash that has become Iceland's latest stumbling block on the difficult road out of a deep recession, jeopardizing its credit rating, access to much-needed bailout money from the International Monetary Fund and desired entry to the European Union.
It has been desperately seeking a revised deal with its European creditors since President Olafur R. Grimsson tapped into public anger and used a rarely invoked power to refuse to sign the so-called Icesave bill into law in January, triggering the national poll.
At the heart of the dispute is the payment of $3.5 billion to Britain and $1.8 billion to the Netherlands as compensation for funds that those governments paid out to around 340,000 nationals with savings in the collapsed Icesave internet bank.
Britain and the Netherlands offered better terms last week - including a floating interest rate on the debt plus 2.75 percent, representing a significant cut on the 5.5 percent under the original deal hammered out at the end of last year.
The British say their “best and final offer has been turned down.” But Iceland continues to hold out for more, aware that any new deal must win substantial political and public support to avoid another veto by the president.
“It is improbable that a new deal on Icesave will be reached before tomorrow,” Finance Minister Steingrimur J.
Sigfusson told reporters in Reykjavik after a Cabinet meeting on Friday.
Locals largely view the deal both as bullying by bigger nations and an unfair result of their own government's failure to curtail the excessive spending of a handful of bank executives that led the country into its current malaise.
