January 12, 2010 / 2:00 PM / 9 years ago

Icesave foes confident as referendum nears

* Icesave opposition widespread, not just party-based

* Poll shows six in 10 Icelanders oppose bill

* Govt talking to foreign powers, hopes to avoid vote

By Niklas Pollard

REYKJAVIK, Jan 12 (Reuters) - They come from all walks of Icelandic life and across the political spectrum, but are united by one aim: to defeat a bill on paying the Netherlands and Britain vast sums lost during the island’s financial meltdown.

And as a national referendum nears, they sense victory.

“I am confident that the voters will reject it,” said Bjarni Benediktsson, leader of the main opposition Independence Party. “This is so painfully unfair and unjustifiable that the average Icelander will say: ‘Ok, stop, this is enough’.”

Icelanders are due to vote on the bill by March 6 after the president unexpectedly rejected a deal the centre-left government struck with the two creditor nations.

Many Icelanders are outraged at the financial burden it would impose — the latest opinion poll shows 6 out of 10 oppose the bill — and the government is making last-ditch efforts to avoid a referendum by holding further talks with foreign powers.

Iceland is in “frantic talks” with ministers in Britain, the Netherlands, the Nordics, and the European Union, a spokesman said on Tuesday, but admitted that it would be difficult to avoid having to hold the referendum. [ID:nLDE60B1BJ]

Iceland owes Britain and the Netherlands more than $5 billion after they compensated savers in their countries who had lost money in high interest savings accounts called Icesave. [ID:nLDE6070R4]

Opposition to the bill is high despite warnings that dumping it could interrupt aid flows Iceland needs to underpin a recovery from a deep recession after the collapse of late 2008.

Iceland’s access to foreign capital markets has been severely restricted in the wake of the crisis and ratings agency Fitch last week cut its credit rating to junk status. [ID:nN0569114]

While even the bill’s opponents have said Iceland should honour its debts, they object to terms they feel could leave Iceland stuck in penury for years. A key issue is the open-ended state guarantee that Britain and the Netherlands insist on.

The Independence Party wants the dispute resolved through mediation by a body like the EU or settled in court.

PARTIES AND PRESSURE GROUPS

Benediktsson said the referendum could decide the fate of a government which has been in power for less than a year.

“To a large extent it is going to be about the life of the government,” he said. “A government that is not able to solve this matter can’t continue.”

Benediktsson’s own party was booted out of power in early elections last year after a wave of sometimes violent protests linked to the financial crisis saw the coalition it led crumble.

But opposition to the Icesave bill does not run along clear party lines, nor do all its detractors seek the removal of Social Democrat Prime Minister Johanna Sigurdardottir, whose government still holds the lead in opinion polls.

Left-Green parliamentarian Ogmundur Jonasson, who resigned as health minister in September last year over Icesave, said many pro-government voters would vote ‘no’ in the referendum.

“It is obvious that even if you vote against the bill you are not voting against the government at all,” he said.

“This government was not formed around the Icesave issue. It was formed to protect the welfare system in times of economic hardship ... I think this is how we want to see this develop — as a non-political issue.”

Opposition also thrives outside the mainstream parties.

A small group called InDefence persuaded roughly a quarter of Icelandic voters to sign a petition that may have helped sway President Olafur Grimsson to refuse to sign the bill.

InDefence argues that the legal basis for forcing tough terms on Iceland to repay the debts is flimsy.

“We will keep on fighting to let people realise that our claim is just,” said Erikur Svavarsson, 37, a lawyer who is one of about 10 organisers of InDefence which has used the Internet to campaign against the bill without paying for advertising.

“We have spent a little less than 500,000 Iceland crowns ($4,000) on our whole campaign, which is nothing.

“We have given all our hours in this, but we feel very strongly between us that this is a calling.”

Editing by Robin Pomeroy

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