On 6/3/2010 Iceland had a referendum on whether to use taxpayer funds to pay off Icelandâ€™s substantial debts to UK and Holland. Icesave internet bank had collapsed and UK had paid $3.5 billion and Holland $1.8 billion as compensation to 3,40,000 nationals who had lost their savings in Icesave.
Icelandâ€™s population is almost the same as the number of depositors in Icesave. Most of the people said no. Many said taxpayers should not pay for the folly of a private bank. Some were against interest payment on debt. Iceland had nationalised private banks that had gone bankrupt in October 2008.
Many people had deposited in Icelandâ€™s banks because of high interest rates they offered. With high interest comes high risk.
It is not fair to make taxpayers pay when banks go bankrupt. Many times banks and companies that go bankrupt are taken over by governments or loan is given. When the country is large the amount per taxpayer is not huge. Iceland being a small country the amount per tax payer was huge.
Many times companies and banks that are bailed out pay huge bonuses to executives who led them to loss. The justification that bonuses are necessary to retain those executives is not valid and without bail outs the companies and banks would have gone bankrupt and the executives would have lost their jobs.
Iceland may find difficult to get loans from IMF and other agencies. Whether not getting entry into European Union will make any difference is another question. The problems in Greece, Spain and Portugal have raised questions about euro.
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