Bank payback plan faces failure as Iceland votes

"I will vote \'no\' simply because I disagree very strongly with us... having to shoulder this burden" from the 2008 collapse of the online Icesave bank, Ingimar Gudmundsson, a 57-year-old truck driver, told AFP.

The issue is whether Iceland should honour an agreement to repay Britain and the Netherlands 3.9 billion euros (5.3 billion dollars).

This would be to compensate them for money they paid to 340,000 of their citizens hit by the collapse of Icesave in 2008.

Observers say an Icelandic refusal to repay the money could block the remaining half of a 2.1-billion dollar International Monetary Fund rescue package, as well as its European Union and euro currency membership talks.

It could also push Iceland\'s credit rating over the cliff and destabilise the leftwing government, which negotiated the agreement in the first place.

According to the latest opinion poll, three quarters of voters will reject the agreement, which was passed by parliament in late December.

It went to a referendum after President Olafur Ragnar Grimsson refused to sign it into law because of public opposition.

According to Magnus Arni Skulason, a founder of the Indefence movement opposed to the deal, the agreement being voted on was "obtained through coercion, with threats from both the British and the Dutch against Iceland."

Echoing the frustration felt by many Icelanders, he told AFP that the demanded 5.5-percent interest rate was particularly unacceptable.

"You\'re basically sending the bill to tax payers for the failure of a private bank," he said.

And for many Icelanders, handing what they consider an exorbitant price to London is especially infuriating.

Many here are still fuming over the so-called "cod wars" with London in the 1970s over fishing rights, and over Britain\'s decision in 2008 -- as Iceland\'s economy was crumbling -- to use an anti-terrorism law to freeze British savers\' assets in the stricken Icelandic bank Landsbanki.

"I\'m not against paying people their money back, but I\'m against (British Prime Minister) Gordon Brown getting his money back," Thorstenn Pall Leifsson, a 43-year-old unemployed construction worker, told AFP.

"This (Icesave deal) is so excessive. I don\'t want us to pay more than what we\'re legally obliged to pay," he added.

Despite the strong emotions surrounding the issue, the all-but guaranteed outcome of Saturday\'s referendum meant voter turnout would likely be lower than in last year\'s general election, when some 85 percent of the country\'s 230,000 eligible voters cast a ballot.

Reykjavik had been negotiating with London and The Hague for weeks to avert the vote, but the talks ended Friday without a new agreement on the table.

Iceland\'s leaders said they would resume talks after Saturday\'s referendum.

Prime Minister Johanna Sigurdardottir insisted Friday it was "a matter of life and death for the Icelandic economy" to resolve the Icesave debacle.

But the way to go was through further talks, she said, calling the referendum "meaningless" and saying she saw no reason to go to the ballot box.

President Grimsson however defended his decision to put the issue to a referendum, telling the Morgunbladid daily that the vote had "already resulted in the British and the Dutch feeling forced to introduce a better offer."

The first referendum results were expected to start coming in shortly after polls close at 2200 GMT, with final results later in the night.

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