93% Of Icelanders Reject "Icesave" Bill In Historic Referendum

Tyler Durden's picture

Another European country is about to be cut to junk by the rating agencies, after a whopping 93% of Iceland voters turned down the ironically named Icesave bill in a historic referendum, which would have saddled citizens with an additional $16k in debt to compensate the UK and Holland with a $5.3 billion note for the failure of Landsbanki. The vote failure, which has already prompted Fitch to downgrade the country to junk, and is now sure to see Moody's and S&P follow suit, has left many to believe that a government crisis is now imminent. Another implication is that an IMF-led loan is now in limbo, demonstrating that the international bailout watchdog is truly powerless when the people of the bailout recipient nation want to have nothing to do with the international rescue circuit.

What is amusing is that the disconnect between what governments think their people want and what people actually want has become unprecedented:

The Icesave deal passed through parliament with a 33 to 30
vote majority. Grimsson blocked it after receiving a petition from
a quarter of the population urging him to do so. The government has
said it’s determined any new deal must have broader political
backing to avoid meeting a similar fate.

Icelanders used the referendum to express their outrage at
being asked to take on the obligations of bankers who allowed the
island’s financial system to create a debt burden more than 10
times the size of the economy.

The nation’s three biggest banks, which were placed under
state control in October 2008, had enjoyed a decade of market
freedoms following the government’s privatizations through the end
of the 1990s and the beginning of this decade.

“This referendum is very peculiar and without any parallel in
Iceland’s history,” said Gunnar Helgi Kristinsson, a professor of
political science at the University of Iceland, in an interview.

And in Iceland, the people not only don't care about what the IMF or the UK think, but they are certainly making their opnioins against the executives of the failed bank felt, in a way that Americans only wish they could.

“Ordinary people, farmers and fishermen, taxpayers, doctors,
nurses, teachers, are being asked to shoulder through their taxes a
burden that was created by irresponsible greedy bankers,” said
President Olafur R. Grimsson, whose rejection of the bill resulted
in the plebiscite, in a Bloomberg Television interview on March 5.


Protesters have gathered every week, with regular numbers
swelling to about 2,000, according to police estimates. The last
time the island saw demonstrations on a similar scale was before
the government of former Prime Minister Geir Haarde was toppled.

Icelanders have thrown red paint over house facades and cars
of key employees at the failed banks, Kaupthing Bank hf, Landsbanki
and Glitnir Bank hf, to vent their anger. The government has
appointed a special commission to investigate financial malpractice
and has identified more than 20 cases that will result in

In the meantime, Iceland, which as recently as 2007 used to be one of the richest countries on a per capita basis, is seeing the net wealth of its citizens sublimate.

The island’s economy shrank an annual 9.1 percent in the
fourth quarter of last year, the statistics office said on March 5,
and contracted 6.5 percent in 2009 as a whole.

Household debt with major credit institutions has doubled in
the past five years and reached about 1.8 trillion kronur ($14
billion) in 2009, compared with the island’s $12 billion gross
domestic product, according to the central bank. Icelanders, the world’s fifth-richest per capita as recently
as 2007, ended 2009 18 percent poorer and will see their disposable
incomes decline a further 10 percent this year, the central bank

Grimsson, who has described his decision to put the depositor
bill to a referendum as the “pinnacle of democracy,” says he’s
not concerned about the economic fallout of his decision.

At this point we will take the opportunity to remind readers once again that the biggest fan of the Iceland experiment was none other than the worst and most full of methane Fed board member in the history of the US Central Bank, Fred "Iceman Napoleon" Mishkin, who not surprisingly has made cheerleader-central CNBC his newest media forum, as he conducts yet another monetary calamity lemming cascade off the cliffs, this time not of Reikjavic, but first of Dover, and then of D.C. (the analogy would be more appropriate if D.C. actually had any cliffs as opposed to 50% underwater housing, and an administration full of hyperinflated hot air).



Mishkin Iceland -

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Anonymous's picture

What will this do to the FX market on Sunday?

Careless Whisper's picture

I dunno, but Hank Paulson said the unemployment ra ra rate will go to 150% if they don't pa pa pay back the ba ba banks.

Anonymous's picture

@careless whisper. hahahaha. laughing at your co co comment. i know hank paulson is a crappy public speaker but you want to know my theory? i think hammering hank's public displays of excessive stu stu stuttering is all a contrived act to convince the public he is harmless even though he is close to being the devil reincarnate. in private conversations with his friends, i bet that hank paulson ne ne never ever stutters.

Anonymous's picture

What like why does a guy who grew up in CT boarding schools sound like a Texan? Or why when there is no teleprompter does Obama say absolutely nothing with as many confusing words as possible?

Problem Is's picture

"What like why does a guy who grew up in CT boarding schools sound like a Texan?"

Because he was a cheerleader at his all male prep school while busy flunking classes... I have a picture...

Dr. Richard Head's picture

p-p-pl-pl-plus te-t-t-ttenn.

Anonymous's picture

Mark-to-model accounting would icesave the banks and then nobody would have to pay. Somebody wasn't thinking.

Anonymous's picture

Stuttering is directly proportional to stress.

dnarby's picture

Stuttering is directly proportional to stress.

Anonymous's picture

Hank "Jimmy" Paulson: "Hey Ti ti ti Timmy. Why don't you bailout AIG for Gu gu gu Goldman?"

Tim "Timmy" Geithner: "Timmy? Timmy. Timmy!"

Ben "Cartman" Bernanke: "Yeah! That's a great idea. I'm glad I thought of that."

(The Fed's rendition of South Park)

Anonymous's picture

so what is the argument in favor of saddling ordinary people for the failure of a private bank?

other than the bankers happy to be paid.

faustian bargain's picture

The argument is in favor of default and start over with a real currency, no bailouts or moral hazard, and 'you get what you pay for' government services.

doublethink's picture


Damned Angelenos!


Los Angeles Fires First Shot In California's War On Banks, As Cities Seek To Wrangle Out Of Swaps



Anonymous's picture

Well, don't you understand? If they could only borrow at 3.6% like Germany, their world would be all good.

masterinchancery's picture

None--bravo Icelanders! Perhaps the new land of the free, home of the brave.

Cistercian's picture

 The argument is that the morts must pay all losses..and the banks must keep all profits.At some point I am hoping people will understand that the BIG banks are actually operated by super-villains.And that they should be treated accordingly.

 Treated like the evil greed addled criminal scum they are.


hedgeless_horseman's picture

How many little-teeny ceramic tiles had to come off the shuttle before the whole thing burnt up?

ElvisDog's picture

Just one actually. There was an impact cavity in one tile on the wing leading edge. It caused a heating  spike that burnt through the aluminum sub-structure like a blow torch.

hedgeless_horseman's picture

Uh oh.  I count at least two so far on this mission.

Anonymous's picture

Brilliant analogy.

gold_tracker's picture

That's a great analogy. A sad one for sure, but would appear rather applicable. 

GoldSilverDoc's picture

Could it be that finally a nation will choose the right path? Can the citizens of Iceland choose a non-governmentally controlled currency, and immediately change the course of all of history? 
Imagine - "Iceland Declares Krona Worthless, Converts To Gold" 
"Iceland Gold Krona Begins Circulation On May 1" 
"Enormous Boom Seen In Iceland Since Announcement" 
"Iceland Repeals All Property And Income Taxes; Declares Open For International Business" 
"IBM Announces Relocation Of Worldwide Headquarters To Reykjavik" 
"Huge Immigration Backlog In Iceland" 
"Capital Pours Into New Icelandic Banks; Banks Promise 100% Gold Reserve" 
One can dream....

faustian bargain's picture

If they did that, I would have to seriously consider learning Icelandic (or whatever their crazy language is called).

Frank Owen's picture

How about... over the last few weeks they've been converting their money into another currency knowing that the financial terrorists would be coming to give them a beating for not doing as they're told. They come, beat the shit out of the Krona, and then the citizens of Iceland laugh as they look at their bloodied krona and pull out another currency, convert it to worthless kronas and pay of all their mortgages and debts. Then declare the krona dead, and start off fully owning what is theirs instead of being peasants on the king's land. Fantasy?

Rick64's picture

Or they could short the krona and then announce they aren't paying the debt.

A Man without Qualities's picture

The lunacy is that mortgage and car loan debts have been converted into a Euro notional (at a historic rate), so they don't have this option.  The thing about the Icelandic banking crash is that no money has been destroyed in the round.  The Icelandic banks paid stupidly high rates on their current accounts (bizarrely depositors failed to grasp the possibility that higher return implies higher risk) then leveraged to the max and paid way too much money to buy crappy overseas assets.  The flow of funds was little guy lends money to Iceland that pays far to much to the big guys for worthless assets.  Iceland was no more than a pass through.  But now, the little guys in Iceland need to pay back the little guys in the UK and Netherlands.  

It's a combination of the worst bits of capitalism and the worst bits of socialism.

Zippyin Annapolis's picture

Good summary of the situation


-- However once the British navy finishes off the Argentines over that latest Falklands oil dust up I might want to spend a little more time looking over horizon South toward their 2 Imperial tormentors: the UK and Netherlands.


At the end of the day the dutch will drop this passive/ agrressive and destructuve stance but never ever count the Brits out--they invented Imperialism.

Anonymous's picture

Frank Owen, Iceland has done close to what you depicted.

Iceland did well for this crisis.

Iceland is located on the outskirts of a consumption sink (Europe) with the known consequences of availability of goods in Iceland.

To counter that, they implemented carry trade which allowed them to grow a lot richer and benefited their society as a whole.

As they knew this would have to end, they designed an exit plan: borrowing from themselves to constitute a basket of currencies (mainly USD, EURO, YEN), this when the Krona was strong against the other currencies.

With that, they have been able to clean a part of their Krona denominated debt when they devalued it as they offered debtors holding debts in a devaluated Krona to be paid back with the reserve basket of currencies.

Icelandic people pocketed the difference(which was invested in real wealth) and now it is trapped in Iceland.

Iceland did very well with the cards hand they had.

More impressively, while this process is nothing new, they seem to be on verge to get away with it. This will have a deep impact on the international scene as some much poorer countries were punished very severely (national resources being privatized stuff like that) for trying a similar scheme to Iceland.

Anonymous's picture

HOw do the kids say it? Epic fai? Powned?

Anonymous's picture

I dont know but I will certainly not qualify the icelandic case as a failure. Greed has grown so sharp nowaday that any kind of investment is felt as a loss.

What Iceland is going to pay back is straws compared to what they already pocketed in.

Like those firms which know that going against this pecular law might earn them a sizeable profit while earning them a fine.

Yes, they do have to pay a 1 million fine but in the meanwhile, they gain five millions.

The situation would be better if they did not have to pay that fine. That's the greedy's position. Others think that well, having to pay a 1 million fine to be able to pocket four millions is still better than not having to pay that 1 million and not pocketing that four million.

jesus's picture

you goldbugs are hilarious


Anonymous's picture

Gold isn't the answer, but neither is transferring private debt to the public account. Iceland is giving suggesting a very different path to an economic takedown of Europe.

Anonymous's picture

I can understand why silver might make you a little uneasy...but gold?

35Pete's picture

Do you know anything about silver fundamentals? Silver has more upside. 

Anonymous's picture

I was going for a Jesus joke.
(I agree with you.)

merehuman's picture

Up on silver=real money, cant fold it, but a 10 oz bar feels like 500 bucks, no its better than that. It doesnt compare.I admit it , i am enamored of it. All my life i got paid in dollars and was always aware it was nothing but paper. A transitional tool and a measurement of value. Part of that value was time invested as well as labor.

The more we value(love) ourselves the more we treasure time. As we age time ranks higher in importance. And no time is more important than now.

I venture that silver as well as time are undervalued.


Mr Lennon Hendrix's picture

4 stars to that!  Time is of the essence!

Anonymous's picture

They would be declared as financial terrorists and be invaded.

Anonymous's picture

LOL! I thought that said IceSLAVE.

alexdg's picture

They would be declared financial terrorists and be invaded, "for their own good".

Careless Whisper's picture

They already have been declared regular terrorists by Britain. You see, my friends, these anti-terror laws have many uses.



35Pete's picture

This "terrorism" thing is so way out of control. The sick part is that so many people still salivate everytime the terrorism bell is rung. 

I check under my bed, in the closet, and even under the hood of the car everyday to make sure that terrorists aren't hiding there, ready to pounce and rain doom on me for the sole reason that they hate my freedoms. 

I'm on guard. Ever vigilant against the political boogeyman. 

Mr Lennon Hendrix's picture

Someone is going to do it.  The US wants to be the first, but they will not back currentsea until the total demise of the doelarr.  You know what I want...State Banks backed with gold/silver/hemp/etc.  I could totally see Iceland going for the jugular now though.  One CAN dream!

merehuman's picture

I understand they had a country wide referendum, chances we have that are ?%

I feel like a farm animal! Duped, disgusted and impoveraged and homeless, a sheep asleep at the wheel of life. This is us!

I am better of than many of my neighbors who really dont want to admit how things are and are slow to prepare.

Not until the dollar actually gets devalued will they believe, and then of course , its too late 



Harbourcity's picture

Can we get a vote like that in Canada?


Anonymous's picture

Would love it.

SWRichmond's picture

Getting one in the U.S. would require legislators and/or chief executives that actually represent the people and not the goddamned banks and the MIC.  In other words, not a snowball's chance in hell.  Instead, we get TARP.

Governments are hungry for money and are looking for ways to tap into it.  If we could verify this: http://frontpage.americandaughter.com/?p=2453

Tonight, a correspondent who has just come home from a Tea Party Townhall Meeting in Salado, Texas with US Representative John Carter (R-Round Rock) issued the warning. She said, “Representative Carter informed the crowd that talk has been bandied about Congress to appropriate every state’s pension plans into the bankrupt Social Security System.” She is absolutely 100% sure that she understood him correctly.