Iceland's President has just announced that he will veto the government's debt-slavery legislation and send the law to a referendum. Which means that it is toast. With 70% of the population opposed, and 25% of them opposed enough to bother signing a petition, the referendum will fail and the law will never take effect. The markets will no doubt wail and gnash their teeth and threaten Dire Consequences for Iceland's "reneging" on a debt it has no moral obligation for and which was forced on them by bullying - but at the end of the day, Iceland is a democracy, and its people simply will not accept being forced to pay for the folly of a few greedy and irresponsible bankers. And any government which disagrees is likely to be forced from office.
It will be interesting to see how the UK will react. In 2008, they abused anti-terrorist legislation to force this debt on Iceland, and they may very well try the same move again. The problem is that no matter how tightly they twist the Icelandic government's arm, it simply cannot deliver. Giving them money requires passing a law, and such a law will fail at a referendum (or, if a referendum is denied, fail the test of public legitimacy so severely as to cause politicians to be lynched and the government to fall). Twisting tighter won't change that, and will likely increase public opposition even further. The question is whether they will understand that, or whether they will continue fruitless sadism in an effort to squeeze blood from a stone...
