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Business

Parliament approves refund for British and Dutch savers

Text by NEWS WIRES

Latest update : 2009-08-28

Iceland's parliament has voted in a law that will allow 3.8 billion euros to be reimbursed to the British and Dutch governments, who compensated money lost by clients of the country's online Icesave bank after it went bankrupt.

AFP - Iceland's parliament on Friday approved a controversial deal to pay back billions of euros (dollars) lost by British and Dutch savers in the collapse of the online Icesave bank.
  
The deal provides for the payment of 3.8 billion euros (5.4 billion dollars) to the British and Dutch governments for the compensation they forked out to disgruntled savers.
  
The accord includes however amendments negotiated by the Icelandic government to obtain a parliamentary majority and those changes still need to be approved by London and The Hague.
  
In Parliament, 34 MPs voted in favour of the accord, while 14 opposed it and 14 abstained. One deputy was not present for the vote.
  
Icesave, an online subsidiary of the Landsbanki bank which had to be rescued in October 2008, attracted over 320,000 British and Dutch savers due to its high interest rates.
  
But they lost their savings when accounts were frozen during last year's credit crunch.
  
The British and Dutch savers were partially compensated by their own governments, which then turned to Reykjavik looking for the money paid out.
  
Prime Minister Johanna Sigurdardottir welcomed the decision by the Althing, or parliament.
  
"I am extremely pleased that we have this result," she told AFP.
  
"This is one of the largest financial and economic issues ever faced by Iceland and it has greatly preoccupied the Althing and the people since the collapse of the banking system last autumn," she said in a separate statement.
  
"The guarantee of the combined loans from the United Kingdom and the Netherlands constitutes the single largest financial commitment ever undertaken by the government of Iceland," she said.
  
Sigurdardottir in early June reached agreement with the British and Dutch governments on the compensation plan but it required approval by parliament.
  
The debate had dragged for 10 weeks as the general public largely opposed the deal amid fears it would plunge crisis-ridden Iceland into poverty for several decades.
  
One poll in early August suggested nearly 70 percent of Icelanders were against the deal, which amounts to about 12,000 euros for each Icelandic citizen in this small island of 320,000 people.
  
Regular protests had also taken place outside the parliament building.
  
One MP who voted against the deal, Margret Tryggvadottir of the Civil Movement, said: "It is ridiculous that the nation will have to take on the losses of private entities."
  
Sigurdardottir finally won the approval of most MPs following amendments that restrict payments to a percentage of economic growth, assurances that Iceland's natural resources cannot be used as collateral, and pushing back the final date for payment from 2023 to 2024.
  
She said Reykjavik would now "consult with the governments of the United Kingdom and the Netherlands" and her government was "hopeful that the Icesave issue would now be concluded in a mutually satisfactory manner."
  
In London, a spokesman for the Treasury said London would "look carefully at any conditions placed upon the loan to ensure that they are reasonable."
  
"This loan is a significant and positive step forward for all parties involved and it is important that we take time and care over the process to make sure of the best outcome for all involved," he said.
  
Icelandic Finance Minister Steingrimur Sigfusson said he expected a relatively speedy approval from London and The Hague.
  
"We have been in touch with them and they already knew where this was heading, so it should not take too long," he told AFP.
  
The Hague had threatened to complicate Reykjavik's bid to join the European Union -- submitted in July in the wake of the country's dire economic meltdown -- if the Icesave problem was not quickly resolved.
  
Iceland, until recently one of the wealthiest countries in the OECD, experienced a decade of economic prosperity based on its aggressive banking sector.
  
But late last year, its key lending institutions were laid low by the global finance meltdown, pushing the economy to the verge of collapse.
  
In October 2008, the government had to take control of the country's three leading banks as thousands of people lost their jobs and their savings in the crisis.

Date created : 2009-08-28

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