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There's been a lot of anger over the last couple of years directed at governments that have used taxpayer money to bail out financial institutions. Well, we're going to take you now to one country where citizens themselves get to decide what to do. That country is Iceland. And over the weekend, the entire population voted to bail out or not to bail out.

David Kestenbaum of our Planet Money team was there.

DAVID KESTENBAUM: The bank at the center of this was called Landsbanki. During the boom, its balance sheet became larger than Iceland's entire economy. And in 2008, the bank failed. The problem was people in the U.K. and Netherlands had savings accounts at the Icelandic bank -hundreds of thousands of people, more than the entire population of Iceland.

So the question up for a national vote: Should the people of Iceland help pay back those depositors? It could be a lot of money, a few thousand dollars for every man, woman and child in Iceland.

And the nation was divided between yes and no. The only thing people agreed on was that the country's economic future could hang in the balance.

What's a person to do?

(Soundbite of laughter)

KESTENBAUM: Meet Heioa Dora Jonsdottir.

Ms. HEIOA DORA JONSDOTTIR: It's so fun to wake up with him.

(Soundbite of laughter)

Ms. JONSDOTTIR: He's always in such a great mood when he wakes up.

KESTENBAUM: Twenty-eight years old - as you can hear - a new mother. We wanted to help Heioa decide. So we told her: We will set up interviews with whichever top experts you want. As it happens, she studied economics in college. So we went to visit one of her professors.

Ms. JONSDOTTIR: OK. We're going to meet Gylfi Zoega. He's a brilliant man. I'm a little bit nervous, actually.

KESTENBAUM: Gylfi looks very, very weary. I know, he tells us, it feels wrong to pay for a mistake you did not make, but we have to.

Professor GYLFI ZOEGA (Economics, University of Iceland): It's very difficult for a small country like this to have an economic recovery if you are at war with your neighboring countries at the same time.

KESTENBAUM: If Iceland votes no, he tells her, we could make a lot of enemies in Europe. And if Iceland gets cut off from Europe, it's just a tiny island in the middle of a very cold ocean.

Prof. ZOEGA: This is the entry ticket into the rest of the world.

KESTENBAUM: A major concern is that if Iceland votes no and does not help repay the depositors, the rest of the world might treat Iceland like a deadbeat. Anytime Iceland wants to borrow, the world might charge a much higher interest rate.

In economics speak, the question is: How will the global debt market react? So we called the global debt market.

Ms. JONSDOTTIR: Hi.

Mr. JONATHAN LEMCO (Principal and Senior Analyst, Taxable Credit Research Group, Vanguard): Nice to talk to you.

Ms. JONSDOTTIR: Yeah. You too.

KESTENBAUM: Heioa is on the phone with Jonathan Lemco at Vanguard, which is based an ocean away in Pennsylvania.

Vanguard manages funds with hundreds of billions of dollars of bonds, the kind of place that might lend Iceland money. Heioa asks, what happens if we vote no?

Mr. LEMCO: That would make investors like us very nervous.

Ms. JONSDOTTIR: Yeah.

Mr. LEMCO: And we can pick and choose all over the world to invest. You know, we don't have to invest in Iceland.

Ms. JONSDOTTIR: Yeah.

(Soundbite of laughter)

Mr. LEMCO: I wish I could be more uplifting. I wish - I really do, because this is not your fault.

(Soundbite of laughter)

Ms. JONSDOTTIR: I know it's unpleasant, and it sounds cruel. It's just the market just wants to get repaid.

KESTENBAUM: So you might think the economics case is pretty clear. But right down the hall at the economics department, we found another economist urging the opposite. Arsaell Valfells told Heioa: Vote no. Don't worry about that bond guy you just talked to.

Professor ARSAELL VALFELLS (Business and Economics, University of Iceland): That's a very typical comment from a bond guy. My experience from working within the financial markets and so on is that greed does not have a memory.

KESTENBAUM: In other words, if bond guys can make money lending to Iceland, they will.

There's another group of people Heioa worries about, though. There were real people who put their money in an Icelandic bank, thinking it would be safe. If she votes no, is she hurting them?

So we made another call across the ocean to England, to someone who had money in one of those bank accounts. His name is Clayton Nash. He says the account paid a really high interest rate.

Mr. CLAYTON NASH: Yeah. I had an Iceland account with a reasonable amount of money in it, actually, about 43,000 pounds.

Ms. JONSDOTTIR: Did you get all your money back?

Mr. NASH: I did, yes.

Ms. JONSDOTTIR: OK. That's fantastic. Congratulations.

(Soundbite of laughter)

Mr. NASH: Yeah. It was great for me. Yeah.

KESTENBAUM: Who gave Clayton his money back? The British government.

When the Icelandic bank failed, the British government stepped in and gave the depositors their money back. The Dutch government did the same thing in the Netherlands.

Heioa wants to do the right thing, but she doesn't want to be a sucker.

And Clayton has already been helped. So her little nation would really just be repaying the gigantic British and Dutch governments. And just for comparison, the population of the U.K. is 200 times larger than Iceland.

Ms. JONSDOTTIR: Has there been a lot of media coverage, have you noticed, in England over this?

Mr. NASH: Not at all. No, very little.

Ms. JONSDOTTIR: OK.

Mr. NASH: In fact, I only found out about the referendum because David mentioned it, so...

(Soundbite of laughter)

Ms. JONSDOTTIR: That's quite surprising to me.

KESTENBAUM: Heioa hangs up.

Ms. JONSDOTTIR: I can definitely see both sides, and that's what's difficult, and that's why I change my mind every 10 minutes.

KESTENBAUM: The next day is voting day. In the morning, Heioa and her boyfriend, Gisli, put their baby in a big stroller, go to her polling place.

Ms. JONSDOTTIR: I got my pen. I'm ready.

KESTENBAUM: Heioa walks into the voting booth, pulls the curtain closed. Her boyfriend and I watch from a distance.

You can kind of see her. You can see she's marking it now.

Mr. GISLI EYLAND: Yeah, yeah, yeah. I think she hasn't decided yet. Her hand is moving back and forth.

KESTENBAUM: Heioa emerges from the booth.

So how did you vote?

Ms. JONSDOTTIR: I said no.

KESTENBAUM: Early polls indicated the yes votes would win, but in the final days, things swung the other way. Sixty percent, like Heioa, voted no.

The people of Iceland have decided, but the British and Dutch governments are appealing. They are taking Iceland to the international courts, taking the case back, out of the hands of the many, and putting it again in the hands of a few.

David Kestenbaum, NPR News.

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