SocialismToday           Socialist Party magazine

Socialism Today 148 - May 2011


Iceland’s referendum

For the second time, No!

WITH 59.8% voting ‘No’ in the referendum on 9 April, Icelanders have declared for the second time that they will not pay for the banking crisis. The total cost of the Icesave deal was €4 billion, equivalent to half of Iceland’s yearly economic activity, and which would take 46 years to pay back.

Icesave was the name used by a large Icelandic bank, Landsbanki, for getting money through accounts in Britain and the Netherlands in which small savers and local governments were promised high returns. When the country’s huge credit bubble burst in 2008, the money disappeared. Governments in London and The Hague guaranteed the money to the lenders, but David Cameron’s coalition still wants the Icelandic government to cover the cost.

This is an attempt to play off one set of taxpayers against another – Icelanders against British and Dutch. The referendum was about the Icelandic government getting the money out of the pockets of the working population to pay for the failings of the private profit-making bank. No wonder the decision went against it again.

A year ago, Icelanders voted ‘No’ to a similar proposal. Then, a massive 93% voted against. This time, the interest rate proposed for repayments had been lowered from 5.55% to 2.64%. The Social Democrats, who lead the minority government, were behind the agreement as was the main opposition, the Independence Party. The Alltinget (parliament) voted in favour by a two-thirds majority. Outside the parties, however, discontent continued to ferment.

When the crisis originally broke, the government fell and there were almost permanent protests – a ‘parliament of the streets’. This time, the president again felt the pressure from below and refused to sign the agreement, forcing a referendum. Two Green-Left ministers quit the government on the issue.

Now, the government says that the Landsbanki bankruptcy agreement can cover most of the cost, implying that taxpayers would not pay. But if there is any money in Landsbanki it should be spent on the crisis in Iceland, not to pay for the bank’s speculation. In any case, Icelanders are not convinced. Cuts and unemployment have taken a heavy toll. Iceland’s economy has been in recession for two years. The rating agency, Moody’s, is about to lower the country’s bonds from ‘junk’ to ‘non-investable’. The Swedish-language predicts "Yet another budget with cuts and tax increases".

The authority with responsibility for reviewing the EU’s free-trade arrangements with Norway and Iceland wants to pull Iceland up before the European Free Trade Agreement Court in Luxembourg. The ‘No’ victory may also lead the IMF to make sharper demands for payment on its 2008 loan. The Icelandic government is now using capital controls to prevent money leaving the country. It could come under pressure from the population to refuse to pay any debts.

President Ólafur Ragnar Grimsson said the referendum showed up "a rift between the government and the people". But the Social Democratic prime minister, Jóhanna Sigurđardóttir, said that the government will not resign. The Social Democrats also want to continue to press for EU membership, although this is even less likely now.

The referendum result underlines the dissatisfaction and anger in Icelandic society. Several new parties have been formed in recent years, but they have not responded to the needs of the people. In municipal elections in the capital, Reykjavík, the Best Party had a big success, winning the mayor’s position. Almost immediately, however, it began new cuts, contrary to its voters’ expectations.

Iceland needs a fighting socialist party that can show the way forward and campaign against the government, the banks’ owners, and the demands of the IMF and EU. The defiant referendum vote indicates the potential for a fight-back by workers and young people. It needs to be followed up with mass mobilisations, strikes and street protests.

Already, the Icelanders’ example can be an inspiration to workers and youth in Ireland, Greece, Portugal and the rest of Europe in the fight against austerity and capitalism. In turn, victory in these countries would have a great impact in Iceland. Bankers and bosses cannot be allowed to make workers and ordinary people pay for the crisis of their system anywhere.

Per-Ĺke Westerlund - CWI Sweden

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