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REYKJAVIK - Icelanders headed to the polls in drizzling rain Saturday in a referendum set to reject a bank repayment deal worth billions that many here consider a foreign diktat, but a "nei" vote is expected to plunge the country deeper into crisis.
"I will vote 'no' simply because I disagree very strongly with us... having to shoulder this burden" from the 2008 collapse of the online Icesave bank, Ingimar Gudmundsson, a 57-year-old truck driver, told AFP.
The issue is whether Iceland should honour an agreement to repay Britain and the Netherlands 3.9 billion euros (5.3 billion dollars).
This would be to compensate them for money they paid to 340,000 of their citizens hit by the collapse of Icesave in 2008.
Observers say an Icelandic refusal to repay the money could block the remaining half of a 2.1-billion dollar International Monetary Fund rescue package, as well as its European Union and euro currency membership talks.
It could also push Iceland's credit rating over the cliff and destabilise the leftwing government, which negotiated the agreement in the first place.
According to the latest opinion poll, three quarters of voters will reject the agreement, which was passed by parliament in late December.
It went to a referendum after President Olafur Ragnar Grimsson refused to sign it into law because of public opposition.
Hundreds of people came out to demonstrate in front of parliament Saturday, demanding the government do more to improve conditions in Iceland, which has seen a hike in unemployment and home repossessions since its once-booming economy crumbled in October 2008.
Banging on pots and pans, the protesters brandished banners exclaiming "Icesave, no, no, no!" and calling for an end to the Icelandic government's "financial casino".
According to Magnus Arni Skulason, a founder of the Indefence movement opposed to the deal, the agreement being voted on was "obtained through coercion, with threats from both the British and the Dutch against Iceland".
Echoing the frustration felt by many Icelanders, he told AFP that the demanded 5.5-percent interest rate was particularly unacceptable.
"You're basically sending the bill to tax payers for the failure of a private bank," he said.
Spessi, a 54-year-old photographer, said he was infuriated that he and other tax payers were being asked to foot the Icesave bill.
"I've lost my house and it's still up to me to pay for this!" he told AFP as he left a voting booth in the Reykjavik city hall.
And for many Icelanders, handing what they consider an exorbitant price to London is especially infuriating.
Many here are still fuming over the so-called "cod wars" with London in the 1970s over fishing rights, and over Britain's decision in 2008 to use an anti-terrorism law to freeze British savers' assets in the stricken Icelandic bank Landsbanki.
"I'm not against paying people their money back, but I'm against (British Prime Minister) Gordon Brown getting his money back," Thorstenn Pall Leifsson, a 43-year-old unemployed construction worker, told AFP.
"This (Icesave deal) is so excessive. I don't want us to pay more than what we're legally obliged to pay," he added.
Despite the strong emotions surrounding the issue, the all-but guaranteed outcome of Saturday's referendum meant voter turnout would likely be lower than in last year's general election, when some 85 percent of the country's 230,000 eligible voters cast a ballot.
At 1500 GMT, only 26 percent of voters had turned out in Reykjavik, compared to 36 percent at the same time in the general elections, according to the electoral commission.
Turnout elsewhere stood at about 30 percent, which was also some 10 percentage points lower than in last year's election.
Reykjavik had been negotiating with London and The Hague for weeks to avert the vote, but the talks ended Friday without a new agreement on the table.
Iceland's leaders said they would resume talks after Saturday's referendum.
Prime Minister Johanna Sigurdardottir insisted Friday that since a better deal was likely the referendum was "meaningless", saying she saw no reason to go to the ballot box.
President Grimsson however defended his decision to put the issue to a referendum, telling AFP he felt "the referendum already has had a very positive effect. It has moved the British and the Dutch towards a fairer deal".
The first referendum results were expected to start coming in shortly after polls close at 2200 GMT, with final results later in the night.
- AFP /ls
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