REYKJAVIK: A deal to repay Britain and the Netherlands billions lost in a 2008 bank crash looks unlikely to win the approval of Iceland's voters in a referendum on Saturday, as the government hopes.
The plebiscite is on an agreement to repay a $5 billion debt incurred after Britain and the Netherlands repaid depositors who had money in online savings accounts.
The "Icesave" accounts were run by Landsbanki, one of three Icelandic banks that collapsed in 2008.
The three most recent opinion polls have shown a majority, between 52 and 57 percent, oppose the deal which the government says is better than one overwhelmingly rejected in March 2010.
Prime Minister Johanna Sigurdardottir said on Thursday a 'no' vote would cause uncertainty for "at least the next one to two years", although her centre-left coalition has not said it will resign if the vote goes against it.
RESORT TO COURTS
"We now have the option to settle this unfortunate affair with dignity and honor, or to embark on a new journey into uncertainty," Finance Minister Steingrimur Sigfusson told Iceland's state broadcasting organisation late on Friday.
If Icelanders turn down the new Icesave deal, the dispute may instead be solved in a European court, a solution some economists say would be much costlier.
The government and economists say solving the Icesave issue will help Iceland get back into financial markets to fund itself after a financial rescue programme, led by the International Monetary Fund, runs out this year.
It will also help the country of 320,000 people remove the controls on capital flows it imposed to stop its currency from falling further.
The controls have left an estimated 465 billion crowns ($4.10 billion), equivalent to a quarter of the island's output, in the hands of foreign investors some of whom want to extricate themselves.
Iceland last month outlined a cautious plan to relax the capital controls gradually, a process expected to take years.
The main steps will take place only once Iceland has shown it can refinance loans in foreign credit markets.
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