Iceland parliament backs Icesave treaty

The Icelandic parliament on Friday voted in favour of paying back billions of euros to the Netherlands and Britain which it borrowed to compensate Dutch and British savers after internet bank Icesave collapsed.

The deal on repaying €1.3bn to the Netherlands was reached in June, but there has been mounting opposition to the agreement in Iceland itself.
Iceland’s prime minister Johanna Sigurdardottir said her government was hopeful the Icesave issue would now be concluded in a ‘mutually satisfactory manner’, website reported.
‘The guarantee of the combined loans from the United Kingdom and the Netherlands constitutes the single largest financial commitment ever undertaken by the government of Iceland. Therefore, as I am sure that every parliamentarian will appreciate, the Icelandic parliament has a solemn duty to ensure an economically sustainable future for the country,’ the prime minister was quoted as saying.
Under the terms of the deal, Iceland does not have to repay any cash for seven years, and then has a further eight years to pay back its debts.
New conditions
However, the Icelandic parliament also added new conditions. For example, the total interest and lump sum payments to the Netherlands and Britain should not be more than 6% of gross domestic product in 2008 – 4% for the UK and 2% for the Netherlands. And, all payments will stop in 2023, whether or not the complete debt has been repaid.
The Icelandic economic is currently contracting and economists say it will be years before it begins to recover.
A spokesman for the Dutch finance ministry welcomed the vote in favour of the treaty. But, he told the Financieele Dagblad, it was still unclear what the effect of the new conditions would be on the deal.

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