Iceland: Is the UK a bully?

REYKJAVIK: On Saturday Iceland is holding a referendum. Not that you would notice it. There are no posters on the walls of Reykjavik, there are no public meetings or protest marches. It is the silent referendum. And yet many say that the country's reputation hinges on the result. Icelanders must decide whether to support or reject a deal to repay Britain and the Netherlands outstanding debts from the failed Icelandic bank Icesave.

When the online bank Icesave failed the British government covered the deposits of those who had put money in the bank. Now it is seeking to get the money back from the Icelandic government. A mere £2.3bn.

London and Reykjavik - and the Dutch - have been haggling over the terms for months. A deal was on the table but then the Icelandic president stepped in. President Olafur Ragnar Grimsson blocked the agreement. He said it contained long-lasting consequences for the Icelandic people and there had to be a national consensus. A referendum was born.

This saga (and that is what it is) has continued until just a few days ago. Indeed the chairman of the Icelandic treasury committee said they had been discussing nothing else for weeks and months. It has been the longest debate ever held in parliament. The Icelandic government has agreed that money should be repaid - the question is at what interest rate. They have argued down to the wire. The British say their "best and final offer has been turned down".

Now, as the two sides negotiated in London, there were doubts that the referendum would go ahead. Nobody knew 24 hours ago whether it was on or off. But something curious has begun in the cold-grey light of late winter. Early voting. On Thursday on the outskirts of the capital I found long queues of voters. Some were taking advantage of early voting to prevent any last-minute cancellation of the poll. They wanted their voices to be heard and counted.

Every person in the line said they would vote "no". They would reject the British offer. One poll suggests 74% could vote "no". The result could even be higher.

In the voting lines there was anger and much of it was directed at Britain. "They're bullying us," was the common complaint. Some turned on Britain reluctantly but nonetheless many fingers were pointed at London. Even the Business Minister complained that London was trying to muscle them. Only recently the Icelandic foreign ministry described the British action as "disproportionate, aggressive and highly damaging".

What incenses the people is that London used anti-terrorism legislation to freeze the assets of Landsbanki, the bank that operated Icesave's internet accounts. They also object to the rate of interest that Britain is seeking on the debt. "It smacks of profiteering," one voter told me.

I sensed that a majority still supported repaying the UK, but only if the terms were fair. Some would like to see the whole issue taken to the European Court. But a significant number of people don't want any money repaid. A fork-lift driver at the port of Grindavik said Icesave had nothing to do with him. He did not see why they should have to pay for "reckless bankers". One man said the scale of repayment was equivalent to what Germany had to pay after the war and would impose years of misery on the Icelandic people.

The British view is simple. They're not bullying; they just want their money back under international agreements.

Now there are consequences for a "no" vote. The UK financial Services Secretary Lord Myners has said that in those circumstances Iceland would in effect be saying "it doesn't want to be part of the international financial system." An IMF loan that Iceland desperately needs is dependent on it settling up with the UK and the Netherlands.

For a moment here I closed my eyes and imagined I was back in Greece. The voices and arguments were similar. There was resistance to embracing austerity. Many believed the recession was caused by greedy bankers and that working people are paying the price. The flaws in Greek accounting and the irresponsibility of Icesave are conveniently set aside. In both countries there is resentment and hostility towards the EU. In Iceland the EU is blamed for poor regulation.

So a "no" vote here in Iceland is not just a rejection of a deal, it reflects, too, a growing anger with spending cuts, wage freezes, unemployment lines, the hallmarks of Europe's time of austerity.