Iceland again rejects debt deal

Sun Apr 10, 2011 11:18am EDT
 

By Anna Ringstrom and Omar Valdimarsson

REYKJAVIK (Reuters) - Iceland faces more economic uncertainty and a drawn-out European court case after its voters rejected for a second time a plan to repay $5 billion to Britain and the Netherlands from a bank crash.

The British and Dutch governments voiced disappointment with the result of Saturday's referendum, in which almost 60 percent of voters opposed the repayment deal.

"We must do all we can to prevent political and economic chaos as a result of this outcome," Prime Minister Johanna Sigurdardottir told state television.

The issue will now be settled by the court of the EFTA Surveillance Authority (ESA), the European trade body overseeing Iceland's cooperation with the European Union.

"My estimate is that the process will take a year, a year and a half at least, Finance Minister Steingrimur Sigfusson told a news conference.

The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online "Icesave" accounts owned by Landsbanki, one of three overextended Icelandic banks that collapsed in late 2008, triggering an economic meltdown in the country of 320,000 people.

Economists have said failure to resolve the issue means Iceland faces delays ending currency controls, boosting investment and returning to financial markets for funding.

But the center-left coalition government said it would not resign despite the defeat.   Continued...

 
<p>Iceland's Prime Minister Johanna Sigurdardottir (L) casts her vote in the Icesave referendum in Reykjavik April 9, 2011. REUTERS/Ingolfur Juliusson</p>