Sigrún Davíðsdóttir's Icelog

After a clear majority for a ‘yes’ to Icesave III in earlier polls it now seems that the ‘no’ vote is gaining ground. This has been happening as reasoned debate lost ground and emotions took over.

Having followed the referenda in Denmark, Norway, Sweden and Finland in the 90s, on Maastricht in Denmark and on EU membership in the three other countries, the course of the Icesave debate follows a familiar pattern. As always happens, there are other issues at play, such as opposition to an unpopular Government and unpopular banks. Many voters will feel that by saying ‘no’ they can say ‘no’ to various things – whereas the question being asked in the referendum regards paying a minimum deposit guarantee to the UK and the Dutch Governments that the Icelandic Government has never refused to pay.

But the absolutely stunning aspect is the fact that although some of those who lead the ‘no’ are people who were in power during the boom years that lead to the collapse plenty of Icelanders still seem to be willing to head their opinion.

Gylfi Magnusson professor of economics at the University of Iceland was a popular minister of trade and finance for two years in the post-collapse Government that was elected in spring 2009. He was independent, not part of any political party and was widely trusted. He has been advocating for a ‘yes’ in the referendum tomorrow. David Oddsson is a previous leader of the Independence Party, PM during the 90s and well into last decade who then secured himself the post of Governor of the Central Bank 2005-2009 when he was pushed out by the present Government. Oddsson is now an editor of the newspaper Morgunbladid and very driven on the ‘no’ side. – As one countryman pointed out to me, it’s intriguing that so many Icelanders prefer to listen to Oddsson than Magnusson where Oddsson has a clear political agenda and Magnusson doesn’t.

Eva Joly, the judge who put French dignitaries to prison in the Elf case, was a consultant to the Special Prosecutor in Iceland. She took all matters Icelandic to her heart. In an article in the Guardian today, Joly is telling Icelanders to say ‘no’, to show financiers of this world that they shouldn’t be bailed out. – This will reach many Icelandic hearts; Icelanders have a predilection for being an example to the world. It didn’t work in banking but saying no the the banking system might work, they think.

Unfortunately, there are some misunderstandings in Joly’s article. Icesave is in no way comparable to the bailouts in Ireland and Greece. Iceland did indeed the opposite, let the banks fail. And Ireland and Greece would do a lot to get the interest rates that are on the Icesave repayment.

With Icesave, the Icelandic state is honouring earlier agreements with the Dutch and the UK government, regarding deposits. Icesave is about a top up by the Icelandic State since assets from Landsbanki, that ran Icesave, will most likely go a long way to cover Icesave. In 2008 the Icelandic government guaranteed all deposits in Icelandic banks in Iceland but left it to the Dutch and UK to pick up the pieces there, discriminating between Icelanders and foreigners to save the Lilliputian but overstretched economy.

All this goes to show that emotions run high and that leaves little space for reason. A ‘no’ will keep Iceland hanging in the air for months and eventually years to come, in a situation where they themselves have very little control over the course of events. That seems to serve interests that want to keep Iceland isolated. Those who are trying to construct something new in the Icelandic economy tend to be on the ‘yes’ side.

Those who advocate for ‘yes’ underline that a ‘yes’ won’t eliminate all uncertainty – but it would at least give mental space for Iceland to rebuild the economy, no trivial task in a country with capital restrictions. The referendum seems to be about saying ‘no’ and holding on to the mental fetters of an Icesave process that can drag on for months and years, with no control over events by Icelanders – or saying ‘yes’ and moving on with rebuilding the economy, tackling any uncertainties if and when they arise.

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