Iceland agrees to pay back $5bn

ICELAND has reached a deal to repay deposits from its failed bank Icesave to the UK and Dutch governments, the negotiating teams said yesterday.

Iceland will start the bulk of around $5bn (£3.17bn) of repayments in 2016 and is due to complete in 2046 – a more gradual payment scheme than previously offered by the UK and the Netherlands.

The country will pay a fixed interest rate of three per cent on the money it owes to the Netherlands, and will pay a rate of 3.3 per cent on the money owed to Britain.

The rates are an improvement on a previous deal of 5.5 per cent interest, which was voted down by Icelandic voters in a referendum in March. Another clause ensures the repayments never exceed five per cent of total government revenue.

“This is significantly more advantageous to Iceland and that will play a role in the public perception of it,” US attorney Lee C Buchheit, who headed Iceland’s negotiating team, said.

The agreement, which could also pave the way for better relations between the various countries and may help to speed up Iceland’s membership negotiations with the European Union, also still needs political approval. The Icelandic government said yesterday it will vote on the new proposals soon.

The UK Treasury said in a statement that “mutually satisfactory closure of this issue will mark a new chapter in UK-Iceland relations”.