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The bills are coming due for Iceland's financial crisis. Back in October 2008, three of Iceland's banks failed. Britain and the Netherlands came to the rescue, covering $5 billion in losses. Now, the president of Iceland has rejected a plan to repay the debt. NPR's Rob Gifford reports from Reykjavik.
ROB GIFFORD: The Icelandic banks and their online subsidiaries, with their high interest rates, had attracted many savers from Britain and the Netherlands. When the banks collapsed 15 months ago, the British and Dutch governments stepped in to refund their savers who lost money.
Britain and the Netherlands then negotiated a deal with the Icelandic government to get their money back, and that bill was passed by the Icelandic parliament. Two weeks ago, though, the president of Iceland, Olafur Ragnar Grimsson, refused to sign the bill. Speaking in a telephone interview afterwards, he explained why.
President OLAFUR RAGNAR GRIMSSON (Iceland): The fundamental basis of the Icelandic political system is that the people, the nation, is the sovereign power. And it is the duty of the president under the constitution to make sure that the people of the country will have the final say on law.
GIFFORD: Grimsson had received a petition signed by a quarter of the population of Iceland, urging him to push for a renegotiation of the terms of the repayment.
As a result of the president's action, there must now be a referendum on the bill. That has thrilled the bill's opponents, who've set up a pressure group called In Defense. It's headed up by high school teacher Johannes Por Skulason, who says Iceland is not even obliged to reimburse Britain and the Netherlands. And even if it does pay some money back, it should be under much better terms.
Mr. JOHANNES POR SKULASON (Teacher; Director, In Defense): Iceland is doing what it can. We're saying we want to pay back, but we're being made to sign a deal that carries within it a risk of national bankruptcy, a risk of Iceland being pushed back to the financial middle ages for years to come.
GIFFORD: Certainly, the payback would hurt, with an interest rate of 5.5 percent. And Iceland already has an external debt of anywhere between three and six times its GDP, depending on who you listen to. Despite opposition, others within society and within government say that passing the law is fundamental to rebuilding Iceland's economic reputation and helping it enter the European Union. So the country just needs to bite the bullet and move on, without the complication of a referendum.
Iceland's finance minister, Steingrimur Sigfusson.
Mr. STEINGRIMUR SIGFUSSON (Finance Minister, Iceland): What do you think would have been the outcome in the United States if the taxpayers had got the chance to vote about the bill, the bailout? I mean, just imagine. It is not an easy task to get the voters to accept increased taxes and economical burdens because of irresponsible behaviors of bankers.
GIFFORD: Sigfusson is hugely frustrated at the president's decision not to sign the bill.
Mr. SIGFUSSON: Obviously, the case is immensely unpopular in Iceland, and quite understandably so. None of us like this, but that doesn't alter the fact that we need to deal with it, we need to solve it so that we are able to move forward and continue our economical restoration.
GIFFORD: There are people on both sides who are pushing for compromise to avoid the referendum altogether and the political turmoil and further economic delay that it could bring. Finance Minister Sigfusson says whether a referendum happens or not, there's something deeper going on in Iceland, moving away from what he calls the culture of neo-liberal greed that had taken hold, and returning home to its Nordic roots.
Mr. SIGFUSSON: I can be very frank about it: What we need to abolish is this neo-liberal greed philosophies that were driving things in the bubble years. What we want to build - re-establish in Iceland is a strong Nordic welfare society with equal justice and equality.
GIFFORD: Icelanders themselves - and there are only 330,000 of them - are divided on whether the president did the right thing or not. But regardless of their views on this particular bill, many share the finance minister's views that things simply got out of hand, and it's time to get back to more solid, dependable, Icelandic ways.
Rob Gifford, NPR News, Reykjavik.