A chill wind

The chill in Iceland will get even colder after its voters ignored international pressure, as well as their own parliament, to veto a plan to repay its debts to Britain. Their defiance may be satisfying but it will also be self-defeating as it seals the country's status as an economic pariah.

Britain's 65 million people have seen their claims for repayment of the 2.3bn owed knocked back after just 143,784 Icelanders turned out at the ballot box, fewer than half of the population.

It is a crazy situation brought about by this Government's decision to reimburse British savers who would otherwise have been left out of pocket by the recklessness of Icelandic bankers.

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The effects of the Scandanavian financial crisis have been felt particularly hard in Yorkshire, where several local authorities had millions tied up in Iceland and the meltdown triggered Yorkshire Building Society's rescue of the Barnsley.

Olafur R Grimsson, Iceland's president, insists that Britain, as well as Holland, which is owed 1.1bn, will get its money back eventually

but it was he who caused the referendum by refusing to sign the repayment deal agreed by the parliament.

Mr Grimsson knows that Britain's huge budget deficit has left it between a rock and a cold place. His decision to play politics over the deal – whether that means warm words for the British, or simply prevarication – will not change the fact that his country will inevitably pay up. Indeed, his behaviour could be taken as recognition of this fact, and with him trying to limit the damage done to his own reputation.

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Yesterday, residents of Reykjavik set off fireworks to mark the result of the vote. It was meant to be a celebration but with the country bankrupt not just financially, but in terms of credibility, the Champagne ought to be put on ice.