Iceland PM says debt repayment to start in summer

City A.M. Reporter
Iceland will begin making debt repayments to Britain and the Netherlands this summer, using funds raised from the sale of assets from one of its collapsed banks, the country's prime minister wrote on Thursday.

Icelanders last week rejected for a second time a plan to repay £3bn to savers in Britain and the Netherlands who lost money in a bank crash. Both countries said they would take Iceland to court.

They had previously compensated their nationals who lost savings in online Icesave accounts owned by Landsbanki, whose downfall triggered an economic meltdown in the island nation of 320,000 people.

In a letter on Thursday to the editor of Dutch daily Volkskrant, Johanna Sigurdardottir said that, irrespective of any court decision, Britain and the Netherlands would get paid from the sales of assets of Landsbanki, one of three Icelandic banks that collapsed in late 2008.

"Payouts from the Landsbanki assets are scheduled to start this summer.

These provide ample funds for the compensation that the Netherlands and Britain have paid depositors in their countries," Sigurdardottir wrote.

Economists have said failure to resolve the dispute could delay progress in easing currency controls, deter investment and weaken an already battered credit rating. Rating agency Standard & Poor's warned on Wednesday Iceland's debt could be downgraded to junk.