After the “no” vote prevailed in Saturday’s referendum, the dispute will end up in a European court. Economists said the uncertainty is hurting efforts to drag Iceland out of recession, end currency controls and boost investment.
“The worst option was chosen. The vote has split the nation in two,” prime minister Johanna Sigurdardottir told Icelandic state television.
Almost 60% of voters rejected the agreement, based on results from five out of six voting districts, including the capital Reykjavik. Many voters were against taxpayers footing the bill for irresponsible bankers. Just over 169,000 votes had been counted out of the 230,000 eligible voters.
Iceland’s prime minister, who predicted a “no” vote would cause economic uncertainty for up to two years, did not say whether the government planned to resign.
“We must do all we can to prevent political and economic chaos as a result of this outcome,” she said.
The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online Icesave accounts owned by Landsbanki, one of three Icelandic banks that collapsed in 2008. Both countries said they were disappointed by the vote.
Ms Sigurdardottir said Iceland would now defend its case before the court of the European trade body overseeing Iceland’s co-operation with the EU, the EFTA Surveillance Authority (ESA). Economists have said this route could be much costlier.
Economic affairs minister Arni Arnasson said he would be in touch with ESA, which last year, in a first stage in legal proceedings, said that Iceland should pay compensation to Icesave depositors.
In February, Icelandic lawmakers backed a repayment plan agreed with creditors, but the president refused to sign the bill, triggering the vote.