Iceland government says not threatened by referendum defeat

11th April 2011, Comments 0 comments

Iceland's left-wing government said Monday it can withstand the referendum defeat suffered at the weekend when voters rejected its repayment plan over the Icesave bank collapse.

"The coalition between the Left Greens and the Social Democrats is strong enough to maintain this government," Finance Minister Steingrimur Sigfusson told AFP following a parliamentary session.

"There is full support on all sides to continue and the Icesave referendum did not affect that," he said, stressing that the government had strived before Saturday's vote to make clear "the election was about Icesave only, and not something else."

Nearly 60 percent of Icelandic voters rejected the government and parliament-backed plan to refund 3.9 billion euros ($5.6 billion) to Britain and The Netherlands for money they spent on compensating 340,000 of their citizens who lost money on Icesave.

The online bank went under at the height of the global financial crisis in 2008.

The result has embarrassed Reykjavik after its parliament had approved the plan with a 70 percent majority, but Sigfusson insisted the government's position was secure.

"We have not had very vocal requests for an election," he said, pointing out that most political opponents had refrained from trying to turn the vote into a referendum on the government.

"Now is not the best time to hold an election," he said, adding that the government instead needed to focus on doing "everything in our power to ensure this does not have disturbing effects".

The rejected deal, the fruit of more than two years of labourious negotiations among the three nations, was considered more favourable to Iceland than a previous accord turned down by 93 percent of voters in a referendum in early 2010.

Britain and the Netherlands voiced disappointment over Saturday's vote, ruling out further negotiation and said Sunday they would return to the courts to get Iceland to refund their money.

The matter would have to be resolved before the European Free Trade Association (EFTA) Court, they said. It plays the role of the European Court of Justice for European Economic Area (EEA) members, which include Iceland.

Sigfusson on Sunday was unfazed by the prospect of litigation, insisting the estate of Icesave's bankrupt mother company would cover more than 90 percent of the claims.

The International Monetary Fund, which is providing Iceland with a $2.1-billion bailout, also took the referendum defeat with ease.

"The government financial plan is on course and at this point it seems unlikely that the result of the national referendum will endanger economic or financial stability in Iceland," the IMF representative in Iceland, Franek Rozwadowski, said in a statement Monday.

"The Icesave dispute has never been a factor in the contract between the IMF and the Icelandic state," the statement added.

The European Commission also said Monday the referendum results in Iceland, which is in talks to join the 27-nation block, would not "impact on the ongoing accession negotiations, to which the commission remains fully committed."

© 2011 AFP

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