The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Icelandic Voters Refuse to Bail out the Banks

Mar 15, 2010

Pay for the failed banks? Icelandic voters replied with a resounding NO, thank you: 93% voted against the proposal in a recent referendum.

During the general financial crash in the fall of 2008, hundreds of thousands of depositors in Britain and the Netherlands lost their savings when the Icelandic bank Icesave failed. The British and Netherlands governments partially reimbursed the depositors as well as the speculators from their countries – in an attempt to stem the financial crisis from turning into a complete, international collapse. Iceland – which had taken over Icesave and other failing Icelandic banks – was stuck with insolvent banks. When the European governments demanded that the Iceland government reimburse them, this helped push the Icelandic government into default.

What did the Icelandic government do? Proposed that every citizen in Iceland pay off part of the debt: $16,000 each. With a 10% unemployment rate, the population of Iceland was expected to come up with all this money to help out the very bankers and politicians who had ruined the economy.

During the years leading up to the financial crash, Iceland had become a haven for speculators, a kind of casino economy. As the money flowed in, Icelandic banks gained control of a sum of money equal to nine times the gross national product of the country, throwing it into the speculative spiral.

In the end, they lost out in this game against much bigger capitalists around the world, who even before the financial crash of 2008 were gambling that Iceland would become insolvent.

When it happened, the insolvent Icelandic government demanded that the Icelandic population pay for this mess. As one Icelandic minister put it, crudely, “Everywhere in the world, it is the taxpayers who save the financial system.”

Except – with the referendum, the Icelandic people said NO!

But it’s not enough for the population to express its opinion in a referendum. It will also have to force those responsible to pay. And not only in Iceland.