Iceland asks for more time to repay Icesave cash

New Landsbanki, the state-owned Icelandic bank, wants more time to repay debts to the Netherlands and Britain stemming from the bankruptcy of internet bank Icesave in 2008.

According to media reports, the bank has asked for more time to repay a £1.5bn bond in order to prevent Iceland’s recovering economy becoming destabilised.

Creditors, including Dutch government representatives, met Icelandic negotiators on Friday. According to the Guardian, they said New Landsbanki will go bust if it is forced to stick to a steep repayment schedule, in euros, from the start of next year.

In addition, Iceland’s central bank, has said publicly the country cannot support the schedule. ‘The repayment profile … is too heavy for the economy. The bonds will have to be extended or refinanced,’ the Guardian quoted the central bank as saying.

No obligation

The European free trade association court ruled in January that Iceland was under no legal obligation to honour deposit guarantees promised to foreign Icesave savers.

Landsbanki and Icesave attracted thousands of savers from the Netherlands and Britain by offering high interest rates.

After the bank collapsed, the Dutch and British governments effectively paid back savers under the banking deposit guarantee scheme and then asked for the money back.

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