2010 Icelandic loan guarantees referendum

Althing President of Iceland Wayback Machine
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The 2010 Icelandic loan guarantees referendum, also known as the Icesave referendum (Icelandic: Þjóðaratkvæðagreiðsla um Icesave), was held in Iceland on 6 March 2010.[1]

The referendum was held to approve the terms of a state guarantee on the obligation of the Depositors' and Investors' Guarantee Fund (Tryggingarsjóður innstæðueigenda og fjárfesta), in particular a 3.8 billion loan (€11,964 per person) from the governments of the United Kingdom and the Netherlands to cover deposit insurance obligations in those countries.[2][3] The referendum was held under article 26 of the Constitution of Iceland after President Ólafur Ragnar Grímsson refused to counter-sign the corresponding Act of Parliament (known as the second Icesave bill) into law on 5 January 2010.[4] The proposal was resoundingly defeated, with 98% voting against and less than 2% in favor.

The referendum was the first to be held in Iceland since 1944, and required special legislation. The Althing (Iceland's parliament) approved a motion on 8 January 2010 which called for the referendum to be held by 6 March at the latest. The motion passed by 49–0 with 14 abstentions.[5] The date of the referendum was later set for 6 March.[1]


The liabilities of the Depositors' and Investors' Guarantee Fund arise from the 2008–2012 Icelandic financial crisis, which saw Iceland's three main commercial banks collapse within the space of a week. One of those banks, Landsbanki, had taken retail deposits from more than 400,000 British and Dutch customers through its branches in London and Amsterdam, through a product known as "Icesave".

At the time of the economic collapse, the Depositors' and Investors' Guarantee Fund had equity of only 10.8 billion krónur,[note 1] about €68 million at the exchange rates of the time and far from sufficient to cover the Dutch and British claims. The initial reaction of the Icelandic authorities was to disclaim state responsibility for the shortfall in the insurance fund, pointing out that both the Guarantee Fund and Landsbanki were private corporations (although the Guarantee Fund was set up and operated under a specific Act of Parliament). One of the governors of the Central Bank of Iceland, former Prime Minister Davíð Oddsson, was interviewed on Icelandic public service broadcaster RÚV and stated that "we [the Icelandic State] do not intend to pay the debts of the banks that have been a little heedless".[6] This led to a diplomatic dispute, and the unprecedented (and controversial) freezing of Landsbanki assets in the United Kingdom through the Landsbanki Freezing Order 2008.[7][8]

An outline agreement was reached on 16 November 2008, after mediation by France and the European Union.[9] Iceland agreed to guarantee the liabilities of the Depositors' and Investors' Guarantee Fund to British and Dutch savers, while the UK and the Netherlands would effectively lend the Guarantee Fund the necessary money.[9] However, the exact terms of the repayment of the loan were not finalized at the time, and negotiations continued into 2009, held up somewhat by the collapse of the Icelandic government in January 2009 and the subsequent elections in April.

Loan agreement

Iceland finally reached bilateral agreements with the United Kingdom and the Netherlands on 5 June 2009. The liabilities of the Depositors' and Investors' Guarantee Fund were £2.35 billion in the UK and €1.2 billion in the Netherlands.[10] The governments agreed that the money would be paid back between 2017 and 2023, so that repayments on the deposit insurance loan would not coincide with the repayment of loans from the International Monetary Fund (IMF), to whom Iceland had to turn during the financial crisis.

First Icesave bill

On 28 August 2009, the Althing (Iceland's parliament) voted 34–15 (with 14 abstentions) to approve a bill (commonly referred to as the Icesave bill) to regulate the repayments. Initially opposed in June, the bill was passed after amendments were added which set a ceiling on the repayment based on the country's gross domestic product (GDP). Under the measure, up to 4% of Iceland's GDP growth (in sterling terms, from a 2008 base) would be paid to Britain from 2017–2023 while the Netherlands would receive up to 2% of Iceland's GDP growth for the same period.[11] Opponents of the bill argued that Icelanders, already reeling from the crisis, should not have to pay for mistakes made by private banks under the watch of other governments. However, the government argued that if the bill failed to pass, the UK and the Netherlands might retaliate by blocking disbursements from the IMF.

Second Icesave bill

The British and Dutch governments did not accept the amendments to the negotiated deal that had been placed into the first Icesave bill,[12] and without a mutually agreed deal continued opposition to payment of the second tranche of the IMF loans.[13] Revised loan agreements negotiations, including the cap on repayments, were concluded on 19 October 2009 and the issue went back to the Althing on the same day. A second Icesave bill was passed on 30 December by 33–30 (no abstentions).[14]

The bill was presented to President Ólafur Ragnar Grímsson at a routine meeting of the government the next morning. Grímsson refused to sign the bill immediately, pointing out that it was less than 24 hours since it had been passed by the Althing, and asked for more time to consider it.[15] Article 26 of the Constitution of Iceland states that bills passed by the Althing must be counter-signed by the President within fourteen days or face a national referendum.

The President had previously scheduled a meeting for 2 January 2010 with campaigners from the "Indefence" movement, which opposes the bill. At the meeting Indefence presented a petition bearing 56,089 signatures (nearly 25% of the Icelandic electorate) urging Grímsson not to sign the bill.[16] By 4 January, the number of signatories had risen to 62,000.[17] However, the leaders of the Confederation of Labor (ASÍ), the Federation of State and Municipal Employees (BSRB), the Confederation of Employers (SA) and the Federation of Icelandic Industries (SI) all urged the President to pass the legislation.[18]

Grímsson announced his decision not to sign the bill at a press conference in his official residence (Bessastaðir) on the morning of 5 January 2010.[18]

Reactions before the referendum

The Icelandic government, led by Prime Minister Jóhanna Sigurðardóttir, immediately expressed its "disappointment" with the President's decision and stressed that "the government of Iceland remains fully committed to implementing the bilateral loan agreements and thus the state guarantee provided for by the law."[19]

The UK Financial Services Secretary, Lord Myners, responded saying that "The Icelandic people, if they took that decision [not to accept the bill], would effectively be saying that Iceland doesn't want to be part of the international financial system,"[20] while Dutch Minister of Finance Wouter Bos called such a decision "unacceptable", saying that, whatever the outcome of the referendum, Iceland would still be "compelled to pay back the money".[21] A spokesman for UK Prime Minister Gordon Brown reacted in similar terms: "The Government expects the loan to be repaid. We are obviously very disappointed by the decision by the Icelandic President, but we do expect Iceland to live up to its legal obligations and repay the money."[22]

Norway announced that its promised loan to Iceland would not be paid out before the national referendum has been settled.[23] The Norwegian loan is part of a €1.775bn package agreed between Iceland and the four other Nordic countries on 1 July 2009.[24]

Credit rating agency Fitch lowered its rating on Icelandic sovereign debt from BBB− to BB+ (junk-bond grade).[20][25]


Icelandic loan guarantees referendum, 2010[26]
Choice Votes %
Referendum failed No 134,392 98.10
Yes 2,599 1.90
Valid votes 136,991 94.98
Invalid or blank votes 7,240 5.02
Total votes 144,231 100.00
Registered voters and turnout 229,926 62.73


  1. ^ ISK8.3bn at the end of 2007 (Financial statements 2007 Archived 30 March 2014 at the National and University Library of Iceland) plus ISK2.5bn raised in 2008 to keep within the statutory minimum (Press release Archived 22 July 2011 at the Wayback Machine).

See also


  1. ^ a b "Icesave referendum set for 6 March". BBC News. 19 January 2010. Retrieved 19 January 2010.
  2. ^ Iceland plans vote on bank payout, BBC News, 5 January 2010.
  3. ^ Iceland decision on bank set for referendum, RTÉ News, 5 January 2010.
  4. ^ Declaration by the President of Iceland Archived 22 July 2011 at the Wayback Machine, 5 January 2010.
  5. ^ Referendum due on Icesave pay-out, BBC News, 8 January 2010.
  6. ^ "Excerpts: Iceland's Oddsson". Wall Street Journal. 17 October 2008. Retrieved 26 October 2008.
  7. ^ Alistair Darling (8 October 2008). "Statement by the Chancellor on financial stability". HM Treasury. Archived from the original on 11 October 2008. Retrieved 18 October 2008.
  8. ^ The Landsbanki Freezing Order 2008 Archived 12 December 2008 at the Wayback Machine No. 2668.
  9. ^ a b "Agreed Guidelines Reached on Deposit Guarantees". Prime Minister's Office. 16 November 2008.
  10. ^ Iceland, the UK and Netherlands Agree on Icesave, Iceland Review, 8 June 2009.
  11. ^ Valdimarsson, Omar (28 August 2009), Iceland parliament approves debt bill, Reuters.
  12. ^ British and Dutch stance on Icesave hardening, Icenews, 28 September 2009.
  13. ^ PM: Iceland cannot wait much longer for IMF payout, Icenews, 29 September 2009.
  14. ^ Icesave legislation passed by Althingi in Iceland, Iceland Review, 31 December 2009.
  15. ^ News flash: Iceland President did not sign Icesave into Law this Morning, Iceland Review, 31 December 2009.
  16. ^ Icesave Pressure Increasing on Iceland's President, Iceland Review, 2 January 2010.
  17. ^ Iceland Still Awaits President's Icesave Decision, Iceland Review, 4 January 2010.
  18. ^ a b President of Iceland Vetoes Icesave Legislation, Iceland Review, 5 January 2010
  19. ^ The Government committed to the Economic Program, Prime Minister's Office, 5 January 2010.
  20. ^ a b Iceland leader vetoes bank repayments bill, BBC News, 5 January 2010.
  21. ^ "Bos uitblijven oplossing Icesave onaanvaardbaar", De Volkskrant, 5 January 2010. (in Dutch)
  22. ^ "British fury after Iceland blocks £2.3bn repayment", The Independent, 6 January 2010.
  23. ^ Iceland president's Icesave decision drawing harsh international response, IceNews, 6 January 2010
  24. ^ Background information on Nordic loans to Iceland, Ministry of Finance, 3 July 2009
  25. ^ Lagere waardering IJsland, nu.nl, 5 January 2010. (in Dutch)
  26. ^ "Results for referendum 6 March 2010 by Category and Sex". Statistics Iceland. 18 May 2010. Retrieved 12 April 2011.