Icelandic voters unlikely to approve Icesave deal

* Iceland holds referendum on debt to Britain, Netherlands

* Second referendum on issue in just over a year

By Anna Ringstrom

REYKJAVIK, April 9 (Reuters) – A deal to repay Britain and
the Netherlands billions lost in a 2008 bank crash looks
unlikely to win the approval of Iceland’s voters in a referendum
on Saturday, as the government hopes.

The plebiscite is on an agreement to repay a $5 billion debt
incurred after Britain and the Netherlands repaid depositors who
had money in online savings accounts. The “Icesave” accounts
were run by Landsbanki, one of three Icelandic banks that
collapsed in 2008.

The three most recent opinion polls have shown a majority,
between 52 and 57 percent, oppose the deal which the government
says is better than one overwhelmingly rejected in March 2010.

Prime Minister Johanna Sigurdardottir said on Thursday a
‘no’ vote would cause uncertainty for “at least the next one to
two years”, although her centre-left coalition has not said it
will resign if the vote goes against it.


Graphic, Iceland growth vs deficit

Graphic, Iceland growth vs currency

Factbox on the Icesave dispute [ID:nLDE736171]



“We now have the option to settle this unfortunate affair
with dignity and honor, or to embark on a new journey into
uncertainty,” Finance Minister Steingrimur Sigfusson told
Iceland’s state broadcasting organisation late on Friday.

If Icelanders turn down the new Icesave deal, the dispute
may instead be solved in a European court, a solution some
economists say would be much costlier. [ID:nLDE64P26Q]

The referendum, in which 230,000 voters can take part,
begins at 9 a.m. (0900 GMT) and ends at 10 p.m. (2200 GMT).

The government and economists say solving the Icesave issue
will help Iceland get back into financial markets to fund itself
after a financial rescue programme, led by the International
Monetary Fund, runs out this year.

It will also help the country of 320,000 people remove the
controls on capital flows it imposed to stop its currency from
falling further.

The controls have left an estimated 465 billion crowns
($4.10 billion), equivalent to a quarter of the island’s output,
in the hands of foreign investors some of whom want to extricate

Iceland last month outlined a cautious plan to relax the
capital controls gradually, a process expected to take years.
The main steps will take place only once Iceland has shown it
can refinance loans in foreign credit markets. [ID:nLDE72O1Y8]
(Additional reporting by Omar Valdimarsson; editing by Andrew

Icelandic voters unlikely to approve Icesave deal