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Europe

Parliament votes to repay $5bn to British and Dutch savers

Text by News Wires

Latest update : 2009-12-31

Iceland's parliament has approved an amended bill to repay more than $5 billion to savers in the UK and the Netherlands who lost their money when the island's banks collapsed during the financial crisis.

AFP - Iceland's parliament approved Wednesday a controversial payout of nearly four billion euros to Britain and the Netherlands, which had compensated tens of thousands of savers in a failed Icelandic bank.

Although the payout has stirred up resentment among many ordinary Icelanders hard hit by their country's financial meltdown in 2008, lawmakers approved by a vote of 33 to 30 the measure which had threatened to become a major obstacle in the small Atlantic island nation's bid to join the European Union.

"Congratulations Iceland!" shouted a lawmaker from the governing left-wing coalition after the announcement the bill had passed, while an opposition lawmaker cried out "treason!"

The measure approves the payout of 3.8 billion euros (5.4 billion dollars) to the British and Dutch governments, which had partially compensated more than 320,000 of their savers who lost money in the collapse of the Icesave online bank.

Icesave, an online subsidiary of the Landsbanki bank that had to be rescued in October 2008 as the global credit crunch hit, had attracted savers due to its high interest rates.

The British and Dutch governments turned to Reykjavik for the money to be returned, and an initial compensation deal was approved by Iceland's parliament in August.

But amendments negotiated by Social Democratic Prime Minister Johanna Sigurdardottir in order to get the deal through parliament were rejected by Britain and the Netherlands.

The dispute threatened to sink Iceland's efforts to quickly join the European Union, forcing Sigurdardottir to return to the parliament with a new bill in line with the initial deal.

The measure adopted Wednesday foresees staggering through 2024 the payment of the 3.8 billion euros, which is equivalent to nearly 40 percent of the country's annual gross domestic product.

A poll taken in August suggested nearly 70 percent of Icelanders were against the Icesave deal, the compensation amounting to about 12,000 euros for each citizen on the island nation of 320,000 people.

"History will show that we are doing the right thing," said Finance Minister Steingrimur Sigfusson after the vote.

But Birkir Jon Jonsson, deputy leader of the opposition Progressive Party said: "How this government has handled this issue has been shameful from the beginning."

The bill must still be signed into law by President Olafur Ragnar Grimsson, and a petition asking him to veto the measure has already garnered nearly 40,000 signatures, a record in Iceland.

The dispute over the compensation scheme had also delayed the disbursement of funds under of a 2.1-billion-dollar IMF standby loan arranged in November 2008 following the collapse of Icelandic banks.

The IMF announced on December 14 it had reached an agreement with Iceland on the release of a third tranche of the loan.
 

Date created : 2009-12-31

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