Iceland quits Icesave talks

TALKS have broken down between Iceland, Britain and the Netherlands over Reykjavik’s duty to repay the £3.8bn lost by depositors in failed online bank Icesave.

Icelandic representatives walked out last night after turning down preferential repayment terms. The failure to reach an agreement means the Icelandic government will press ahead with a referendum on whether or not it should reimburse the British and Dutch national purses, a question likely to be met with a resounding “no” from voters on 6 March.

Iceland was offered a sweetened floating interest rate of 2.75 per cent above Libor, a significant improvement on the 5.5 per cent currently being charged. The UK and Dutch governments also put a two-year interest holiday worth £400m on the table.

Iceland rejected the deal on the basis that paying any interest above Libor would be unacceptable.
Credit ratings agencies Fitch and Standard & Poor’s may now downgrade Iceland as the Icesave issue is seen as central to the country’s economic problems. The wrangling has also delayed help from the International Monetary Fund.

A Treasury spokesperson said: “This money is still outstanding to UK and Dutch taxpayers and we remain committed to reaching a final agreement with Iceland in due course.”

Icelandic finance minister Steingrímur Sigfússon said: “We had hoped to be able to reach a consensual resolution of this issue on improved terms, but this has not yet been possible.”

The UK and Netherlands governments stepped in to guarantee the deposits of 343,000 savers after Icesave collapsed in October 2008.