So, let me get this straight. Icelandic bankers behaved very badly, collapsing their country’s banking system, and losing the money of scores of British and Dutch overseas depositors. The British and Dutch governments could have said to their unlucky citizens, “Sorry, but you took the risk of putting your money in an overseas bank. We can’t help you.” But they did not take that path; instead, they bailed out their citizens — and are now trying to hit Icelandic taxpayers — keep in mind that this is a tiny country — with the bill. Today Icelanders are voting on whether or not to pay that cost. Excerpt from the NYT report:

To put it in perspective, it is as if American taxpayers were being forced to pay $5 trillion (plus interest) to reimburse customers of the Japanese branch of a failed private American bank, said Magnus Arni Skulason, the head of InDefence, a group agitating for a better deal.
The question of how to pay has convulsed this tiny country of about 319,000 people, severely damaging its international reputation and paralyzing its economic recovery. It has so incensed its residents that on Saturday they are expected to reject overwhelmingly the latest Icesave repayment plan, in the first national referendum ever held here on any subject.
The vote raises larger questions about Iceland’s place in the world, said Silja B. Omarsdottir, a political scientist at the University of Iceland. “Are we going to be a country that takes our obligations seriously? Or are we going to say, ‘No, we’re going to do things our way’ and be an international pariah?”
In the scheme of world debt, $5.3 billion is small potatoes. But it represents more than 40 percent of Iceland’s gross domestic product. The interest alone would eat up one-fourth of the country’s revenues, said Prime Minister Johanna Sigurdardottir, who called finding a resolution to the Icesave dispute “a matter of life and death for the Icelandic economy.”

The referendum was prompted on Jan. 5 by the refusal of Iceland’s president, Olafur Ragnar Grimsson, to sign into law the latest Icesave agreement, arrived at after months of bad-tempered negotiations with Britain and the Netherlands and narrowly passed by a divided and fractious Icelandic Parliament.
Mr. Grimsson’s move was unexpected but widely popular in a place that feels bullied and ill treated.

Well, aren’t they? I’m with Alex Massie (who is British) on this one — especially on his point about how disgraceful it was that the UK government treated Iceland like a terrorist nation. The poor Icelanders are screwed no matter which way they turn. This is what happens when you are a small country, I guess. They may not be able to keep themselves from ruin — thanks, bankers! — but at least they can keep their dignity. Go Iceland!

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