Britain and Netherlands strike new Icesave deal
Friday 10 December 2010
Iceland, Britain and the Netherlands have struck another deal over the repayment of the $5bn (£3bn) owed by the island nation in connection with the collapse of the online bank Icesave at the height of the financial crisis two years ago, the Dutch finance ministry said yesterday.
The British and Dutch governments were forced to cover losses incurred by local account holders when Icesave's parent company, Landsbanki, failed in October 2008.
Iceland has now agreed to pay a fixed interest rate of 3 per cent on the money owed to the Netherlands and 3.3 per cent on the money owed to the UK. Repayments will commence in 2016 and are scheduled for completion by 2046.
A previous agreement came to nothing after Icelanders rejected the repayment deal, which imposed a 5.5 per cent interest rate on the money owed, in a national referendum earlier this year. Yesterday, the Dutch finance ministry said the new pact, under which Iceland will have to make annual repayments of no less than 1.3 per cent of its gross national product, will be final once it is been approved by the country's Parliament, which narrowly approved the previous agreement, and its President, Olafur Grimsson.
Mr Grimsson refused to authorise the previous deal until it had been subjected to a public vote. That refusal was only the second time in Iceland's history that the President had not approved a bill cleared by Parliament. Mr Grimsson withheld his signature after he had been petitioned by nearly a quarter of the nation's voters.
All three of Iceland's three main banks failed during the credit crisis. About 400,000 savers across Britain and the Netherlands held accounts with Landsbanki when it filed for bankruptcy after the credit markets dried up in the wake of the collapse of the Wall Street investment bank Lehman Brothers.
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