UK and the Netherlands close to deal over Icesave

The UK and the Netherlands are reportly within days of securing a deal with Iceland over the repayment of the money given to Landsbanki Icesave account holders after the bank collapsed in October 2008.

A spokesperson for the UK treasury said yesterday that negotiations are continuing.

The UK and the Netherlands shelled out more than $5bn (£3.2bn) to cover the losses of over 400,000 British and Dutch account holders in the bank’s online Icesave accounts after the Icelandic Financial Supervisory authority placed Landsbanki into receivership. They have been trying ever since to recover the money from recession-hit Iceland.

The main points of the deal have been agreed, with money to be paid back with an interest rate of 2.78 per cent, according to weekend reports on Icelandic television.

The Icelandic government will also have a nine-month moratorium on interest payments.

A previous agreement proposing a repayment rate of 5.5 per cent was rejected by a referendum in March after 90 per cent of Icelandic voters protested against the proposals angered that taxpayers would have to pay for the mistakes of the banks.

“In parliament there has been discussion of an interest rate around the level of the Dutch state’s funding cost, which is lower than 5.5 per cent, but not that low," said a spokesperson for the Dutch finance ministry, referring to the 2.78 per cent rate.

The draft agreement has been presented to the Confederation of Icelandic employers and officials from Landsvirkjun – the National Energy Company.

Iceland’s finance ministry announced on November 16 that it was hopeful of securing a deal in the next few weeks.

Last month Dutch Finance Minister Jan Kees de Jager said a deal was close but full payment was required, news agency ANP reported.

“The Netherlands does not accept anything less than the principal plus interest,” he said.

At the time a spokesman at the ministry said it was still demanding “reasonable compensation” from Iceland over the length of time the loan was outstanding.

Talks over the issue were last held in September.