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Can't pay, won't pay!

Who was consulted when Gordon Brown and Alistair Darling decided to put the rescue of the global capitalist system ahead of every other priority? Was there a rash of Blair-style focus groups? Were any opinion polls commissioned? Not that we know of.

But, even as the grip of winter brings activity to a halt across the Northern Hemisphere, something is stirring once again in Iceland.

Yesterday, President Olafur R. Grimsson delivered a major blow to the global financial system when he responded positively to a petition by a quarter of the country’s population of just 320,000. Opinion polls say that two-thirds of the population are with the petitioners in opposing government proposals to raise interest rates to help repay £3.4bn of Icesave deposits owed to the UK and Netherlands.

The bill amounts to £40,000 for every household in Iceland – an eerily similar sum to that New Labour has tied round the neck of UK householders.

Grimsson, who is serving his fourth term as the elected president, said it was in the interests of democracy to put the plan to a referendum, given the importance of the issue to Iceland’s future.

“It has steadily become more apparent that the people must be convinced that they themselves determine the future course,” he said. “The involvement of the whole nation in the final decision is therefore the prerequisite for a successful solution, reconciliation and recovery.”

The idea that people might have a say in their future sent shock waves around the world. There’s a real fear that a vote by Iceland’s people against repayment could trigger a similar revolt in countries with much deeper debt – like Spain, the US, and the UK.

Capital’s advanced guard struck back as Iceland’s credit rating was reduced to junk status by global agency Fitch. Further help from the International Monetary Fund has been thrown into doubt. New Labour minister Lord Myners was wheeled out to warn Iceland that it wouldn’t be able to join the European Union if the money wasn’t repaid.

What happens if the referendum takes place and the people vote “No” is anyone’s guess. Countries have defaulted on their debts before, but never has the world of finance been so interconnected and so interdependent. You’ll remember that New Labour used anti-terrorist legislation late in 2008 freezing all Icelandic assets on UK soil.

Iceland is small, but the impact could be world-changing. Even Premier League football club West Ham United is caught up in the net. It is currently up for sale by its current owner CB Holdings whose biggest shareholder is Icelandic bank Straumur. This went bust last year in the wake of the global crisis which saw off the three largest banks Glitnir, Landsbanki and Kaupthing. Before the crash their combined debt exceeded approximately six times the value of the nation's annual output.

It’s just less than a year since the “Saucepan Revolution" – so called because of the pots and pans protesters had with them – that made Geir Hilmar Haarde the first leader to resign as a result of the global economic crisis.

President Grimsson, clearly senses the potential for a repeat performance on an even more dramatic scale. A few months ago he told the Global Creative Leadership Summit that during the global financial meltdown “the political system was tested to its limit,” adding: “Even in the most stable and secure democracies, it almost resembled the revolutionary situations we read about in history books.”

Grimmson was quick to add: “But we have the capability and the mandate to solve these problems.” Yesterday, by refusing to sign the legislation agreeing to punitive repayments to Britain and the Netherlands, Grimmson himself discovered that this “mandate” is more imaginary than real. The Icelandic people themselves have spoken: Can’t pay, won’t pay! It should become the rallying call around the world.

Gerry Gold
Economics editor
6 January 2010

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