Iceland votes on debt payments to UK, Netherlands

People in Iceland are getting ready to vote on the proposal to use £3.5 billion of taxpayers' money to pay Britain and the Netherlands.

The payments are to be made because governments in those countries had to bail out their citizens who lost their deposits when the banks in the nation collapsed during the financial crisis.

People are angry over the proposal and are most likely to vote 'no' in the referendum. People say that it is bullying and profiteering by bigger nations. Pre referendum poll shows that about three quarter of the Iceland's population of 320,000 citizens will vote NO.

The vote comes as the nation is already struggling deep recession, risks of falling on the credit ratings and its ability to borrow funds from international bodies like the International Monetary Fund and even the nation's desire to enter the European Union.

The country has been trying to again discuss a deal with other European creditors after the president refused to sign Icesave bill into law in January. The president's refusal to sign the deal has resulted in the national poll.

The issue of contention is the payment of £2.3 billion to Britain and £1.2 billion to the Netherlands. The payments are to me made as compensation for the funds, these countries paid investors who has savings account in Icesave internet bank. The government in Britain and The Netherlands are believed to have paid out to more than 340,000 investors.

After the collapse of three of Iceland's biggest banks the country was overwhelmed with its deposit-insurance scheme. Most of the citizens now believe that they should not be made to pay for the mistakes of their government.

The two countries have offered a new term with a floating rate of interest on the debt plus 2.75%. The original deal last year had determined the rate at 5.5%.

Britain said that its best offer had been turned down. Iceland is expecting a better deal to win the support of the people and the president.