Iceland is struggling to make amends on a huge international debt, but the final price tag may be far larger than the nearly $6 billion owed: it could also hinder efforts to join the European Union. The debt, a legacy of the country's financial meltdown last year, concerns funds Iceland's government has proposed paying back to Britain and the Netherlands after they reimbursed savers who lost money in Icelandic deposit accounts. The “Icesave bill” before parliament has caused a storm of discontent on the island of 320,000 people, many of whom argue they should not have to foot the bill for mistakes made by banks under the watch of other governments. But Iceland has little choice in the matter, analysts say, as failing to push through the bill could cause new problems for a nation which has plenty on its plate already. The biggest repercussion from a defeat of the bill would be further delays in aid from the International Monetary Fund (IMF) and other lenders – money Iceland needs if it is to succeed in lifting capital controls and mending its hard-hit economy. While opposition is fierce and loud, many expect a bill to pass in some form, with added clauses requiring the ability to renegotiate if Iceland has trouble making payments. Parliament reconvenes next week. Magnus Magnusson, director at the University of Iceland's Social Science Research Institute, said those who want Iceland to stay independent will use the affair to stoke anti-EU feelings. “They will say the government has sold out on the issue, hasn't stood up for Iceland's interest,” he said. If Britain or the Netherlands cried foul over any amendments to the bill, that would be an even bigger victory for the anti-EU camp, he added. A heavy burden The deal calls for Iceland to repay the debt over 15 years. The government believes assets of the failed Landsbanki will cover 75 percent of the debt. Arni Sigurdsson, a Left-Green member who sits on the committee working on the new conditions, said the bill as it stands would garner only 30 or 31 votes out of 63, just short of what it needs to pass. “It will not go through as it is,” he said. “Very big interests are at stake for the Icelandic nation. I'm not sure if neighbouring countries understand how heavy a burden this is for future generations. It's a big responsibility for parliamentarians to shoulder.” Sigurdsson hopes the bill can be tailored so as not to jeopardise the current deal but admits there are no guarantees. Iceland applied last month to start talks on EU membership and analysts say the 27-member bloc may not entertain an application unless a debt deal is set in stone. But there is a feeling among Icelanders that they are being bullied not just by two countries but by the whole EU. “The British and the Dutch are pressuring us to accept the Icesave agreement unconditionally, without any reservations, and they are using the European Union to help them,” said Minister of Health Ogmundur Jonasson, a member of the Left-Green party. “I want to keep this as completely separate matters. But it seems to me the European Union is not doing that at all. They seem to want to force us down on our knees.” The government will need more time to win the hearts of a nation that has long been sceptical of Brussels and which treasures its independence. On top of that, Icelanders are still sore over Britain's action last year in using anti-terror legislation to freeze Icelandic assets, a move seen as adding insult to injury. Olafur Eliasson, a founder of “In Defence Group”, whose website homepage proclaims “Icelanders are not terrorists”, calls the Icesave deal “mind-boggling”. “I think honestly we were bluffed into this,” said Eliasson, a music teacher. “This is serious money. I cannot make this by giving more piano lessons. We have to sell assets, exports.” Icelanders are already deeply divided on joining the EU and will have the final say on membership when a popular vote is held after negotiations have finished. However the Icesave affair is resolved, it will clearly stick in the minds of voters. “The population feels like Iceland has been bullied into agreeing a negotiation that is quite bad, that it didn't get a good deal,” Magnusson said. “That rubs off on the European Union unfortunately.”
