Jubilee Debt Campaign: Iceland voters should demand new debt system

Iceland voters should demand new debt system

Campaign group calls for arbitration over Icesave debts; new international system would help fight poverty

Jubilee Debt Campaign (1) has called for an arbitration system to be established to settle the Icesave debt row, as Iceland’s voters go to the polls on whether to accept British and Dutch repayment terms tomorrow (2). They believe a ‘no’ vote in Iceland should prompt a radical shake-up in the way international debt is handled, which would mean that debts are not used as an justification for creditors forcing unjust measures onto debtor countries.

Campaigners believe that a new way of dealing with debt would not only help ensure stability in Europe, but would transform the potential of developing countries currently burdened by unjust and unpayable debts and assist their fight against poverty.

A ‘no’ vote is expected in tomorrow’s referendum, which could lead to the financial isolation of Iceland, for instance risking loans from the International Monetary Fund (3) as well as Iceland’s financial rating. Campaigners argue that this is a clear example of how the international lending system tends to turn a deficit into a crisis by laying the full responsibility for debt on the debtor. Together with the absence of insolvency procedures for sovereign states, indebted countries have no protection from unpayable or unjust debts and can be forced to repay irresponsible loans, at high rates of interest, even if basic services to its citizens are neglected.

The anti-poverty campaigners point to parallels with developing countries fall foul of an international lending system that promotes one-sided, undemocratic decisions which have caused poverty and injustice across the world. They say that countries are right to state that their first duty is to ensure the human rights of their own citizens, and that this must be enshrined in a more formal mechanism to work out international debt.

Nick Dearden, Director of Jubilee Debt Campaign said:

“Debt has been used at an international level to impoverish some and enrich others throughout history. Now that it’s happening on our doorstep, let’s try to learn the lessons.

No-one is saying Iceland should not pay anything back, but it takes two sides to create a debt, and both sides must share responsibility when things go wrong. The current system only blames the borrower country – allowing lenders to squeeze the last drop of blood out of their debtors, whatever impact that has on the people who live in the debtor country. Around the world, many countries still pay far more on servicing unjust debts than they do on health or education for their own people (4).

We are proposing a new way of dealing with debt – a ‘debt tribunal’ (5) – which would ensure that countries are not forced to pay debts which compromise their citizens’ human rights, or debts based on unjust lending. In Iceland, as elsewhere, the responsibility for toxic debt lies with the domestic and international financial sector and a total failure on all sides to regulate in the interests of ordinary people. A ‘debt tribunal’ would ensure that people would not be forced to pay the price for the recklessness of bankers and provide a strong incentive for responsible lending in the future.”


For more information and interviews contact:

- Nick Dearden 07932 335 464, 0207 324 4724


(1) Jubilee Debt Campaign is a UK coalition demanding 100% cancellation of unpayable and illegitimate developing country debts. For more information see www.jubileedebtcampaign.org.uk.

(2) Iceland’s citizens will vote in a referendum on 6 March on whether to accept UK and Dutch terms for repayment on the debts run-up by the collapse of Icelandic bank Landsbanki in 2008. Landsbanki owned the Icesave brand which attracted significant British investment via the internet in the 2 years running up to the bank collapse.

(3) The International Monetary Fund (IMF) is backing a bailout package of $4.6 billion with a loan of $2.1 billion but this is currently on-hold.

(4) Lebanon spends over 50% of government expenditure in servicing debts, Uruguay 32% and the Philippines 31%.

(5) An international institution in a neutral space, like the United Nations, where an independent arbitrator could, after hearing from the parties and civil society groups, prevent creditors from squeezing money from a country which could not afford it, or paying money for a loan deemed illegitimate. Such a system would incentivise responsible lending and democratic borrowing. Both sides would take responsibility for the impacts of lending.