On Saturday the Icelandic people vote in a referendum on whether the Icelandic state and thus the citizens should guarantee the so-called Icesave claim. Icesave was a bank deposit account that promised market-leading interest rates. When the bank failed, the question arose if the Icelandic depositors' guarantee fund – a private institution financed by the banks – should have taxpayer backing. Instead of letting depositors lose their money or even wait for compensation from the bankruptcy estate, the governments of the UK and Netherlands (where the Icesave products where marketed) decided to reimburse depositors from their own countries. The reimbursement included the full principal, while the recklessly high-interest profits of the risk-seeking depositors were thrown in as a bonus.

Then the British and Dutch authorities went to the Icelandic government and claimed, with reference to EU regulation, that the compensation was in fact the responsibility of the Icelandic taxpayer and that Iceland had to reimburse the British and the Dutch in full.

The claims on Iceland are huge, considering the size of its population – £3.5bn equals a claim on the British taxpayer of £700bn. The claim is contested; it has a doubtful legal basis, and an even more doubtful moral basis.

In a similar vein, the people of Ireland, Greece, Portugal and other EU nations have had to accept a total guarantee of all loans made by commercial lenders, thus leaving both financial institutions and bondholders free of all responsibility. Why is this? Has this been discussed properly? Is the idea that taxpayers should necessarily guarantee private lenders a commonly accepted proposition? Is reckless lending supposed to be without consequence?

Instead of applying the customary methods of writing off debt, it seems that an invisible consensus has been created – reminiscent of Chomsky's phrase of the "unconscious conspiracy" – that the financial excesses and reckless lending of the past decade shall be carried forward by the taxpayers into the unforeseeable future. As a result, citizens across Europe are facing extreme cuts in public services, tax rises and massive rises in unemployment.

Serious sovereign debt problems have, until now, been limited to developing countries, thwarting real social and economic development. But now the problems that people across some of the poorest countries in the south have been struggling with for decades are hitting home in the north.

It is in this context that the Icesave referendum is both meaningful and important for Europe and the wider world. It is evident that the democratic process is lacking. There has been no public debate to decide if taxpayers should bail out financial institutions as a matter of principle, or not. I seriously doubt that the European taxpayer thinks this is just and fair. It is not clear whether this is an ideological stance or a practical one. And if it is purely practical, is it sustainable?

The financial crisis has led to unimaginable suffering for millions of people who have lost their homes, jobs and pensions. These men and women know what these losses mean, while international financiers, bankers and bondholders walk away fully compensated, with their bonuses and surreal salaries and profits intact, as if nothing had happened. Their cynical and reckless behaviour is clearly visible, like bomb craters in the economic landscape.

The world is now looking to the Icelandic people, who have hitherto refused to accept the order of the day – unconditional bailouts of the financial sector. I hope that this commendable fighting spirit will carry the day.