Viewing cable 09REYKJAVIK228, PARLIAMENT FINALLY PASSES ICESAVE

VZCZCXRO8917
PP RUEHIK
DE RUEHRK #0228 3651201
ZNR UUUUU ZZH
P 311201Z DEC 09
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC PRIORITY 4248
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
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UNCLAS REYKJAVIK 000228 
 
SENSITIVE 
 
SIPDIS 
 
TREASURY FOR NORTON 
NSC FOR HOVENIER 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON IC
SUBJECT: PARLIAMENT FINALLY PASSES ICESAVE 
 
REF: Reykjavik 227 
 
¶1. (U) After months of debate, Iceland's parliament passed the 
Icesave bill late in the evening of December 30 by a vote of 33 to 
¶30. Passage of the bill allows the government to provide a state 
guarantee for the Depositors' and Investors' Guarantee Fund's 
repayment of up to $5.5 billion to the British and Dutch governments 
for loans covering losses by their depositors as a result of the 
October 2008 Icelandic banking collapse. The opposition voted 
uniformly against the bill while most members of the coalition 
government supported the measure. Only two members of the 
coalition, Lilja Mosesdottir and Ogmundur Jonasson, broke ranks and 
voted against the bill. The one independent in the parliament, 
Thrainn Bertelsson, voted in favor of the Icesave bill. The 
president now has two weeks to sign the bill into law. 
 
¶2. (U) Steingrimur J. Sigfusson, the leader of the Left Green Party, 
hailed the vote as an important step in Iceland's economic recovery. 
 "It is my firm belief and conviction," he said, "that the new year 
will bring economic recovery." The opposition, on the other hand, 
feels that this decision will saddle the Icelandic people with 
crippling debts for generations to come. The leader of the 
Independence Party, Bjarni Benediktsson, said that "by passing this 
bill, the Icelandic government (the coalition government of the 
Social Democrats and the Left Greens) wants to make the debts of 
private banks the debts of the Icelandic public without taking the 
issue to court." 
 
¶3. (U) This is the second time that Iceland's parliament has voted 
on the Icesave agreement this year. In its first iteration, which 
passed in August, parliament added significant amendments to the 
original agreement signed with the British and Dutch governments in 
March. Those two governments found the amended version of the 
agreement to be unsatisfactory. Renegotiations forged a new 
agreement that the Icelandic Parliament officially accepted in the 
December 30 vote. 
 
¶4. (U) The opposition tried to amend this bill to require a general 
referendum to be held on the issue within six weeks. The proposed 
amendment was struck down by the same 33-30 margin of the bill. The 
President, Olafur Ragnar Grimsson, has two weeks to sign the bill 
into law and has stated that he intends to examine the matter 
closely before making a final decision. He said that he cannot 
ignore the large percentage of Icelandic voters (more than 45,000) 
who signed a petition asking him not to sign the bill in order to 
force the matter to go to a national referendum. President Grimsson 
plans to honor his promise to the leaders of the group that 
organized the petition, InDefence, and meet with them before making 
a final decision. 
 
¶5. (SBU) Comment: Assuming the President signs the Icesave bill 
into law, it will be a significant step for Iceland because it opens 
the door for economic recovery and allows economic policymakers to 
look forward rather than backward. This step ensures that the IMF 
program and Nordic loans will continue and allows the government to 
direct its limited resources towards other pressing matters. The 
decision is largely unpopular with the general public and even those 
Icelanders who supported the agreement felt the nation had been 
backed into a corner. The matter sparked unrest and, at least on 
one occasion several months ago, threatened to topple the 
government. At this point, the coalition seems adequately cohesive 
to continue. Although the issue has been resolved in parliament, 
the wounds created by the Icesave controversy will likely heal 
slowly and affect the country for years to come. End comment. 
WATSON