So, the Icelandic electorate today told the British and Dutch to shove off. The mess is about the bill for Iceland’s spectacular bank collapses. The Anglo-Dutch governments made their depositors whole at a cost of approximately $16,500 for every man, woman, and child in the Republic of Iceland. The “no” vote appears to garnered 93%. A last-minute Anglo-Dutch offer to cut the interest rate on the debt from 5.5% to 2.75% does not appear to have generated much sympathy among Icelandic taxpayers.
It isn’t clear what the referendum means. “We want to be perfectly clear that a ‘no’ vote does not mean we are refusing to pay,” said the Finance Minister. In other words, Iceland will probably pay anyway. Nonpayment would hold up an IMF loan and put off the day when Iceland can lift its capital controls and return to some semblance of economic normalcy. It would also imperil (maybe even kill) its chances to join the E.U., let alone the eurozone.
In light of all that, I would like to resurrect my proposal that Iceland resurrect the Icelandic Commonwealth, this time in the form of the Commonwealth of Iceland. The numbers add up. It makes sense for both Washington and Reykjavík. It would end any need to go to the IMF. The deal could be unwound unilaterally at any time. There isn’t even any need to go the fully-irreversible route on citizenship: the people of American Samoa are U.S. nationals, not citizens.
Sounding more win-win to me every day. Just like having Britain give its security council seat to India.