Should the majority of Icelanders vote against the Icesave agreement, it could end up costing taxpayers far more than the agreement itself could.
Supreme Court lawyer Lárus Blöndal, speaking on the news discussion show Silfur Egils yesterday, talked at length about the Icesave agreement. Those who oppose Icesave have argued that taxpayers shouldn’t foot the bill for debts owed to former Icesave depositors, and that one solution would be to take the matter to court.
Blöndal argues that the European Free Trade Authority’s Surveillance Authority (ESA) is already of the opinion that Iceland is obligated by international law to pay Icesave. If a referendum kills the current Icesave agreement, the ESA will likely take the matter before EFTA court for violation of the EFTA treaty. The ESA has won 25 of the 27 cases they have taken to trial there.
Should judgement fall against Iceland, the country could be obliged to pay a much higher interest than the 2.64% that the current Icesave agreement calls for.
The estimated cost to taxpayers is up to about 49 billion ISK, between now and 2014. However, should EFTA court rule that Iceland has to pay the same interest rates the Irish are facing – 5.8% – the cost to taxpayers increases to 513 billion ISK, and should it be on par with what Portugal is currently paying down – 7% – costs could reach about 700 billion ISK.
Blöndal therefore argues that rejecting the current agreement and taking the matter to court is a dangerous risk to take. He added furthermore that Landsbanki’s assets are probably greater than has been brought to light. The current Icesave agreement calls upon the banks to cover as much of the money owed as possible, with the remainder falling upon the state.
The Icesave referendum is scheduled to take place 9 April.