Iceland reaches agreement for foreign savers

Published: 17 November 2008

Iceland confirmed on Sunday 16th November that it had finally reached a deal with several EU states on how to repay thousands of pounds back to those foreign savers with money in frozen Icelandic bank accounts. Iceland, a non EU member has been in conflict with both Britain and the Netherlands, resulting in a delay in the International Monetary fund’s $6 billion dollar rescue package. "What this means here and now is that the IMF will now discuss our case on Wednesday and, following that, we expect that our application will lead to release of the funds we have negotiated with them," Prime Minister Geir Haarde said according to a government website. "According to the agreed guidelines, the government of Iceland will cover deposits of insured depositors in the Icesave accounts in accordance with EEA (European Economic Area) law," the Icelandic government said in a statement, saying this "common understanding" would form the basis for more talks. An Icelandic government spokeswoman said EEA rules stipulate that retail and wholesale depositors would be entitled to about 20,000 Euros ($25,370) per account. "We had thought initially that we were dealing with two European countries, that is the UK and the Netherlands, but that's not the case -- we are facing the entire European Union and probably other countries as well," Haarde said. Approximately 300,000 British savers had accounts worth around £4 billion in Icesave accounts of Landsbanki, one of the banks that crumbled under the financial Icelandic meltdown. It attracted global interest due to the high interest rates and favourable terms fir savers. Britain and the Netherlands have welcomed the steps to unfreezing the accounts. The British treasury confirming that "The UK government has always supported an IMF loan to Iceland and welcomes any progress that would see resolution for British depositors and equal treatment for all creditors," the spokesman said.* Britain has already begun making repayments through the financial services compensation scheme and has guaranteed all savers will get their money back. Iceland faces a major recession after the global ‘credit crunch’ led to the collapse of its three main banks, which the Icelandic government have now taken over. It badly needs a cash injection to revive its faltering economy. The government said on Sunday 16th November the Icesave deal would allow for the "expeditious finalisation" of talks over financial aid. Haarde said money to cover the Icesave payouts would come from the sale of the assets of the three nationalised banks. "The European countries are aware of our situation and we have pledges to the effect that we will not be made to shoulder more than the nation is able to," Haarde said. "Terms and conditions of the support we are now expecting from the European countries are still to be decided." International Monetary Fund Managing Director Dominique Strauss-Kahn told a news conference in Washington on Saturday that the lender would finalise a rescue package for Iceland on November 19th 2008. *Source Reuters Sunday November 16th 2008

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