Iceland went to the polls yesterday in a referendum on the government's debt-repayment deal with the UK and the Netherlands - and rejected it utterly, with 93% voting against. That's a powerful message to Iceland's international "creditors" that the Icelandic people do not regard themselves as liable for the private debts of selfish bankers - and a powerful threat to any Icelandic government who dares to think otherwise. Icelanders have already toppled one government over the banker's bailout, and it looks like they'll be quite happy to do it again if the current government fails to properly represent their views.
The interesting question is what the UK and Netherlands will do. They're making the usual threats of financial armageddon, but the blunt fact is that the Icelandic government simply cannot meet their demands (and if it purports to, it will be rolled and replaced with one that rejects them). Turning the screw tighter - e.g. by repeating their 2008 abuse of anti-terrorist legislation - won't change that, and will simply harden attitudes further. Unfortunately, acknowledging that reality would mean a loss of face, and so we're likely see a lengthy period of pointless and futile sadism, as the UK tries to squeeze blood out of a stone.
