Campaigners have called for an arbitration system to be established to settle the Icesave debt row, as Iceland's voters go to the polls on whether to accept British and Dutch repayment terms tomorrow (6 March).
Jubilee Debt Campaign believe a 'no' vote in Iceland should prompt a radical shake-up in the way international debt is handled, which would mean that debts are not used as a justification for creditors forcing unjust measures onto debtor countries.
Campaigners believe that a new way of dealing with debt would not only help ensure stability in Europe, but would transform the potential of developing countries currently burdened by unjust and unpayable debts and assist their fight against poverty.
A 'no' vote is expected in tomorrow's referendum which could lead to the financial isolation of Iceland, for instance, risking loans from the International Monetary Fund as well as Iceland's financial rating.
Campaigners argue that this is a clear example of how the international lending system tends to turn a deficit into a crisis by laying the full responsibility for debt on the debtor.
Together with the absence of insolvency procedures for sovereign states, indebted countries have no protection from unpayable or unjust debts and can be forced to repay irresponsible loans, at high rates of interest, even if basic services to its citizens are neglected.
The anti-poverty campaigners point to parallels with developing countries falling foul of an international lending system promoting one-sided, undemocratic decisions which have caused poverty and injustice across the world. They say that countries are right to state that their first duty is to ensure the human rights of their own citizens, and that this must be enshrined in a more formal mechanism to work out international debt.
Nick Dearden, Director of Jubilee Debt Campaign said: "Debt has been used at an international level to impoverish some and enrich others throughout history. Now that it's happening on our doorstep, let's try to learn the lessons.
"No-one is saying Iceland should not pay anything back, but it takes two sides to create a debt, and both sides must share responsibility when things go wrong. The current system only blames the borrower country - allowing lenders to squeeze the last drop of blood out of their debtors, whatever impact that has on the people who live in the debtor country. Around the world, many countries still pay far more on servicing unjust debts than they do on health or education for their own people.
"We are proposing a new way of dealing with debt - a 'debt tribunal' - which would ensure that countries are not forced to pay debts which compromise their citizens' human rights, or debts based on unjust lending. In Iceland, as elsewhere, the responsibility for toxic debt lies with the domestic and international financial sector and a total failure on all sides to regulate in the interests of ordinary people. A 'debt tribunal' would ensure that people would not be forced to pay the price for the recklessness of bankers and provide a strong incentive for responsible lending in the future."