Iceland rejects massive debt payments to foreign savers

Icelanders have been rejected by a clear majority, the law allows compensation to nearly 300,000 British savers and Icesave bank Netherlands, which went bankrupt during the financial crisis.

According to the polls on foot urn after the referendum, the "no" reached 90% of the vote.

The agreement achieved by the Government in London and The Hague to compensate savers had generated a degree of popular resistance that led President, Olaffur Grimsson, to refuse to ratify the law regulating returns.
Grimmson made the decision after 56,089 people, a quarter of the electorate Island signed a petition against the law and asked to submit it to referendum.

The original agreement provided for returning the 3,700 million (5,000 million) of outstanding debt in 15 years and an interest rate of 5.5%.

Meanwhile, the Netherlands and the UK have made an offer considerably improved at a fixed rate and variable rate in the fourth quarter.
But despite that there was a better offer on the table, the referendum was conducted on the original proposal as it was passed by Parliament.The Icelandic prime minister, the Social Democrat Sigurdaóttir Jóhanna, favored to suspend the referendum and go for a new agreement, but the cancellation of the consultation was not possible without the approval of the opposition.

Sigurdaóttir announced that it would not participate in the vote to consider the referendum and no sense that, whatever its result would not change things at all because it is trying to negotiate a new agreement.
Key agreement for closer to Europe

Achieving implement an agreement with the Netherlands and the UK is key to Iceland because it would open the door to the possibility of receiving international aid and propel them closer to the European Union (EU).

But without a new enhanced agreement with the Netherlands and British creditors credits promised by the International Monetary Fund (IMF) and the countries of northern Europe would be blocked, which would put Iceland on a serious budget situation and the country would even the brink of bankruptcy.
Moreover, negotiations for joining the EU would be in danger of being swamped.
The rejected standard affects about 300,000 saved Netherlands and British who were attracted by high interest rates offered by Icelandic banks and that in the end were hard hit by the financial crisis.
The compensation of 34,000 German investors by the Kaupthing Bank already ruled in the summer.The cost of compensation to Icesave savers accounts for two thirds of Iceland's annual budget.
Proponents of the referendum have argued during the campaign that they want to achieve better conditions for the payment of debt.