Iceland votes no to pay off plan
(9 March 2010 – Global) 93.5 percent of Iceland's voters on Saturday rejected a US$5.3 billion (A$5.8 billion) plan to pay off Britain and the Netherlands for debts created by the collapse of an Icelandic Internet bank but an agreement could still be reached with in a matter of weeks.
Icelanders were deciding whether to approve the payment of US$3.5 billion to Britain and US$1.8 billion to the Netherlands after the governments compensated around 340,000 of their citizens who had funds in the high interest collapsed bank Icesave.
Prime Minister Johanna Sigurdardottir said that the result was no surprise; now Iceland must turn to the task of finishing the negotiations on Icesave, he added.
Iceland’s central bank governor, Mar Gudmundsson, told Dow Jones Newswires that despite the outcome of the vote an agreement could be reached on the repayment of losses linked to failed internet bank Icesave within one to two weeks.
It's conceivable that there could be a settlement within one to two weeks if there isn't a backlash from the referendum and there is no reason to expect Iceland's currency, the Krona, to take a hit on the result of the vote, Mr Gudmundsson added.
Mr Gudmundsson told Dow Jones Newswire that the concern would be if negotiations dragged on, raising the possibility of downgrades by rating agencies, delaying expected aid from the International Monetary Fund and Nordic countries, and creating more economic uncertainty.
If it starts to do that to a significant degree, then the recovery program will be delayed, Mr Gudmundsson said.
The government would not be able to take any steps to lift the capital controls in the near term; the room for manoeuvre for monetary policy would be less than liked; and then this would affect the level of investment in the economy and have macroeconomic consequences.
Prime Minister Johanna Sigurdardottir said that the result was no surprise; now Iceland must turn to the task of finishing the negotiations on Icesave, he added.
Iceland’s central bank governor, Mar Gudmundsson, told Dow Jones Newswires that despite the outcome of the vote an agreement could be reached on the repayment of losses linked to failed internet bank Icesave within one to two weeks.
It's conceivable that there could be a settlement within one to two weeks if there isn't a backlash from the referendum and there is no reason to expect Iceland's currency, the Krona, to take a hit on the result of the vote, Mr Gudmundsson added.
Mr Gudmundsson told Dow Jones Newswire that the concern would be if negotiations dragged on, raising the possibility of downgrades by rating agencies, delaying expected aid from the International Monetary Fund and Nordic countries, and creating more economic uncertainty.
If it starts to do that to a significant degree, then the recovery program will be delayed, Mr Gudmundsson said.
The government would not be able to take any steps to lift the capital controls in the near term; the room for manoeuvre for monetary policy would be less than liked; and then this would affect the level of investment in the economy and have macroeconomic consequences.
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