After receiving a petition containing signatures from almost ¼ of the registered voters in Iceland, Iceland’s President Ólafur Ragnar Grímsson vetoed the bailout bill. It appears that the original version, which would saddle every man, woman, and child in Iceland with a debt of €12,000, about $17,000.

The original bill which passed contained a provision allowing for renegotiation on any unpaid amount after 2024, but the British and Dutch threw a fit over that, so, like the debt slaves that they are on the way to becoming, the government promptly caved, and the Althingi passed a bill without any real prospect of ever getting the bankers’ boots off of their necks.

It has the effect of requiring the bill to be passed by referendum, which is an uphill road, when you consider the fact that 62,000 people out of a population of about 320,000 just signed a petition asking for a veto.

The President notes in his official statement, (PDF) that he believes that it is the right of the people to make such a decision:

It is the cornerstone of the constitutional structure of the Republic of Iceland that the people are the supreme judge of the validity of the law. Under the Constitution, which was passed on the foundation of the Republic in 1944, and which over 90% of the nation approved in a referendum, the power which formerly rested with the Althingi and the King was transferred to the people. It is then the responsibility of the President of the Republic to ensure that the nation can exercise this right.

In the comments of Calculated Risk.s post on the matter, a commenter nailed the absurdity of the deal for the Icelandic people:

They lose their IMF bailout money I think.

Am I right that the proposed IMF bailout is about $6 billion? And the bill from Britain is apparently for 3.4 billion pounds, or about $5.5 billion?

Funny coincidence, that.

Yes, funny that: Because a bunch of people invested in the Internet branches of a local bank, accounts that had were never guaranteed by the Icelandic government, because of the high amount of interest paid, the Icelandic people are supposed to take a loan from the IMF to pay off the people who made risky investments to get high returns.

High returns=high risk. This is not even investing 101, it’s investing, “remedial classes, because you spent high school stoned.”

The investors knew what they were getting into.

Basically, this is the US paying AIG counterparties, but in an amount that comes to ½ of GDP.

Basically, the deal with Iceland was as follows: put your population in debt slavery, and in return, you get, an IMF loan to pay the morons who invested in a dodgy bank.

Then, the IMF will demand that Iceland:

• Dismantle its social safety net
• Sell off its fishing rights, which is the major productive industry in Iceland, to foreigners who will rape the fisheries.
• Fire public employees.
• Privatize energy, water, and other utilities, so that foreigners can buy it and rape the citizenry.

In return, Iceland’s debt might not get downgraded to junk status.

I’m with Felix Salmon on standing up to bullies:

I’m quite ashamed of the bullying tactics being used here by the UK government. What happened was that an Icelandic bank, Landsbanki, started attracting UK depositors through its Icesave brand. When Landsbanki failed, the UK government bailed out those depositors in full. And now it wants that money back from the Icelandic government, which never guaranteed the Icesave deposits. If you thought the cod wars were bad, this is much worse.

(emphasis mine)

One of the flaws in the current finance system is that requirement that people be made whole when they chase high returns. It creates moral hazard, which leads to more stupidity.

Rinse, lather, repeat.