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Iceland agrees to repay foreign savers

Text by REUTERS

Latest update : 2008-11-17

A month after Iceland went bankrupt, the country has reached a deal with several EU countries, including the UK and the Netherlands, to repay the thousands of savers who deposited money in Landsbanki, one of the banks that went broke.

REYKJAVIK - Iceland said on Sunday it had agreed with several European Union states how to repay thousands of foreign savers with money in frozen Icelandic accounts, potentially unlocking billions of dollars in aid.

Conflicts over the accounts between Iceland, not a member of the EU, and Britain and the Netherlands have been delaying loans for Iceland from the International Monetary Fund (IMF) and other lenders.

"According to the agreed guidelines, the government of Iceland will cover deposits of insured depositors in the Icesave accounts in accordance with EEA (European Economic Area) law," the Icelandic government said in a statement.

"They also entail that the EU, under the French Presidency, will continue to participate in finding arrangements that will allow Iceland to restore its financial system and economy."

There had been signs of a thaw when IMF Managing Director Dominique Strauss-Kahn told a news conference in Washington the lender would finalise a rescue package for Iceland on Nov. 19.

Iceland faces a severe recession after the global financial crisis led to the collapse of its currency and the government takeover of three of its largest banks. It badly needs funds to help revive currency trade and restart the economy.

It reached a provisional deal for a $2 billion IMF lifeline in October and other lenders, including the EU, had indicated they might be willing to stump up cash once the IMF programme won official approval.

But Britain and the Netherlands have been frustrated by the situation for savers in their countries who had deposited money in the "Icesave" accounts of Landsbanki, one of the banks that crumbled during Iceland's financial meltdown.

Iceland said the current EU president France had initiated the talks over the Icesave conflict.

The agreement to offer Icesave depositors the protection of EEA laws "will allow for the expeditious finalisation of negotiations under way concerning financial assistance for Iceland, including the IMF", the statement added.
 

Date created : 2008-11-16

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