Paying a heavy price

An unusual first referendum

This was Iceland's first referendum in its 66 years as a republic, but the vote was perhaps also unique for another reason: is there any other democracy in which the prime minister has not turned up on polling day?

A new and better deal with the UK and the Netherlands was in the pipeline, Jóhanna Sigurðardóttir and the finance minister, Steingrímur J. Sigfússon, had said. A plebiscite was therefore redundant. So neither of them voted. Nor had the government done much to advertise the referendum. Even a week before, it was uncertain whether the ballot would be held; parliament concluded that it had to be.

Unsurprisingly, turnout was considerably lower than usual, at around 63%. Younger people were particularly visible, but the attitudes were the same across the age spectrum. “Why should I pay the debts of a bank?” asked a 57-year-old man. “I wasn't invited to the party and now they are sending me the bill for it.”

“By saying ‘No', we are...not refusing to pay,” said one young woman. “We are only saying we shall not bear all the responsibility.”

Similar sentiments were expressed on the placards carried by the roughly 1,000 people who marched down Reykjavík's main shopping street.

But the protest was both smaller and quieter than those in 2008 and 2009, when many thousands of Icelanders turned out regularly to bang their pots and pans in an ultimately successful call for the government to leave office.

An underwhelming campaign yielded an overwhelming result: almost 94% voted against the deal.

Perhaps the vote was not as irrelevant as Sigurðardóttir had argued. Certainly, the man who called the referendum, Ólafur Ragnar Grímsson, felt it contained an important message. At the end of the day, he emerged to pose the question that made the referendum meaningful for many. “The big question in my mind now is: What is Gordon Brown going to do?” Grímsson said.

The same question explains why some in the team renegotiating the Icesave deal had reportedly argued that a referendum should be held. A clear ‘No' would, they contended, help in negotiations with UK Prime Minister Brown and his Dutch counterpart, Jan Peter Balkenende.

It is unclear if better terms would be enough; around 50% want a referendum on any Icesave deal and many might say ‘No' again.

At this point, the clearest loser is the government, and not just because of the result.

A 21-year-old woman was furious at Sigurdardóttir's decision not to vote: “She has talked about national votes for years and now, because she does not agree, she has given democracy the finger.”

The opposition now wants an all-party government of national unity. Certainly, many feel this government has not lived up to its mandate.

“There was a ‘pots and pans' revolution here and we elected a new government,” said one protestor outside the parliament. “But this government has not done what it was elected to do: it has not defended our homes and our families.”
Bjarni Brynjólfsson

What did Icelanders vote down?

The referendum is the latest political fall-out of the collapse of Iceland's banking sector in 2008. 

When the sector collapsed, account-holders of Icesave, an offshore unit of the Icelandic bank Landsbanki, found that Iceland's Deposit and Investor Guarantee Fund was too small to cover their losses. Many of those account-holders were British and Dutch. The British and Dutch governments stepped in, lending the fund money to compensate account-holders.

Last June, the Icelandic government agreed to the principle that it should re-pay London and The Hague for these loans. The cost, though, is enormous – around €3.9 billion, or roughly half of Iceland's gross domestic product. After one of the most protracted debates in its history, Iceland's parliament last August adopted a law implementing the agreement, which was approved by Ólafur Ragnar Grímsson, Iceland's president.

However, lawmakers attached a number of conditions that were not accepted by the British and Dutch governments. The government then submitted a revised bill that was narrowly passed by the Althingi in (Iceland's parliament) in December 2009 in the face of fierce opposition. Grímsson refused to sign it into law, triggering Saturday's referendum. The referendum was therefore on the December 2009 bill, and does not formally affect the August 2009 law.

Since then, London and The Hague have offered Iceland better terms. That offer has yet to be turned into a formal agreement. However, it did mean that the referendum lost much of its meaning: Icelanders were being asked whether they accepted a politically defunct deal containing worse terms than the Dutch and British governments are currently offering.

Correction: This explanation of the vote has been adjusted to make clear that the law passed in August 2009 was not at issue in the referendum.