Iceland's Experiment in Populism Gone Wrong

Among January's postings was a story of populism gone wrong as public outcry over public debt in Iceland lead politicians to declare a referendum vote over repayment rather than stick to agreements made with Dutch and British governments. The fact that the voice of the public is being heard by politicians, particularly in a nation of approximately 300,000, is admirable. However, Iceland is currently in serious financial and economic trouble and is in dire need of aid funds from organizations such as the International Monetary Fund. Financing is already in place, but payments have been, and will continue to be, frozen so long as lenders believe that the risk of repayment is too high. If current talks with the British government working toward yet another agreement break down, the nation is scheduled to hold its referendum on March 6th.

Despite anger over the perception that they are being forced to pay for the greed and excess of bankers, both the government and the citizens of Iceland would do well to step back from the situation and consider the long-term implications of a 'no' vote to repayment. Though The Financial Times is correct in pointing out that the British and Dutch have not been faultless in the situation, and that claims of bullying could be made, perception is everything in this situation. The government made international agreements with its counterparts in London and The Hague, and it would cause nearly irreperable harm were it to reneg on them as financiers and bankers would clearly think twice before future dealings with the island state. Rarely do potential actions have such clear cut negative impacts, particularly during the decision-making stage. The government of Iceland should consider that during current negotiations and before the citizens of Iceland do something in a fit of pique that cannot be undone.