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Iceland 'agrees deal' with UK over collapsed bank Icesave

Published 18/10/2009

Iceland has agreed to repay Britain and the Netherlands 5.7 billion dollars (£3.5 billion) it borrowed to compensate savers who lost funds in the collapse of an Icelandic internet bank, the Reykjavik government said today.

Iceland will pay £2.3 billion to Britain and £1.16 billion to the Netherlands from 2016, with payments spread over several years and loosely tied to the pace of the island nation's recovery from the global economic crisis.

Britain and the Netherlands agreed in June to lend Iceland the funds to reimburse customers of failed internet bank Icesave, but rejected an earlier deal that would have linked repayments more explicitly to the country's economic growth.

Many in Iceland had opposed the repayment plan, dubbed the "Icesave bill". Critics said it would force the tiny North Atlantic nation to make repayments it could not afford. Iceland health minister Ogmundur Jonasson resigned last month in protest.

Iceland needed to agree to a programme to settle the debts to be allowed to draw on 4.6 billion dollars (£2.8 billion) in promised bail-out funds from the International Monetary Fund and Nordic countries.

The deal is also expected to help ease Iceland's membership talks for entry into the European Union, which began in July.

Iceland was an early victim of the global financial crisis, when three of the country's leading banks collapsed.

The country's previous government resigned in January, as the value of the currency plummeted and unemployment and inflation spiralled.

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From Belfast Telegraph