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Ásta Ragnheiður Jóhannesdóttir (r) the Speaker of Iceland's parliament, the Althingi, receives a report on the banking collapse on April 12, 2010. Behind her on the right is Jóhanna Sigurðardóttir, prime minister of Iceland.
Icelandic parliament supports latest deal with UK/ Netherlands on Icesave
€4bn debt issue
The Icelandic parliament, the
Althingi, on Wednesday voted support for a bill confirming the latest agreement
reached between Iceland, the UK and the Netherlands on the Icesave €4bn debt
The result was a strong majority of
more than two-thirds approval for the new agreement. A total of 44 MP´s voted in
favour of the agreement , 16 MP´s opposed and 3 MP´s abstained.
The bill waits the formal approval
of Iceland's president.
"The result of the voting today, with such a strong majority of the
Parliament approving the new agreement, is extremely important. The voting will
undoubtedly have a positive impact on the Icelandic economy and help the country
achieve it's goals in restructuring the economy. Too date much progress has been
made in getting Iceland back on track and the resolution of the Icesave issue is
a huge step in that direction," Steingrimur J. Sigfusson, minister of
When the Icesave online bank
collapsed in 2008, €4bn in deposits from 300,000 British and Dutch depositors,
including local governments, were at risk.
Iceland was required by EU rules to
maintain deposit insurance for its banks and when Landsbanki Islands bank
collapsed, its Icesave unit also crashed.
The deposits were attracted by the highest interest rates in the UK and the
Netherlands. The British and the Dutch governments refunded the deposits and
Gordon Brown's government used the UK Prevention of Terrorism Act to freeze the
transfer of funds from the UK.
Landsbanki Islands bank is still
being unwound and Iceland will recover some funds from the wreckage but last
year a long-term repayment deal on Icesave was rejected in a referendum.
The latest deal cuts the average
interest rate to 3.2% compared with 5.55% in the rejected deal; interest
payments would commence immediately and principal repayments in 2016, with
repayments spread over a maximum of 37 years.
In excess of 30,000 people - -
almost a tenth of the Icelandic population - - have so far backed a petition to
Ólafur Ragnar Grímsson, the Icelandic president, to hold another referendum.
Sovereign default can seem like a
panacea to some but it's not easy for countries to draw a line under
international obligation, despite questions of morality.
"Iceland has been able to recover because we let the private banks fail...and we could devalue,"Ólafur Ragnar Grímsson, president of Iceland told CNBC in Davos last month. The IMF program will probably be over later this year and the country is on the road to recovery, he said. He also discussed the country's plans to join the EU: