Tuesday 05 July 2022

Iceland may refuse €1bn Dutch loan

The Icelandic government may refuse to use the €1.1bn loan which the Netherlands offered it in mid-October, the NRC reports on Thursday.


The purpose of the money is to enable the Iceland authorities to pay back Dutch savers who have put their savings into the country’s internet bank Icesave.
Icesave’s parent bank Landsbanki went bankrupt at the beginning of October owing Dutch savers some €1.6bn. Under the terms of the guarantee scheme thrashed out by Dutch finance minister Wouter Bos and his Icelandic counterpart, the first €20,887 of savings are Iceland’s responsibility. The Dutch state will reimburse the rest, to a maximum of €100,000 per saver.
The Netherlands offered the loan because Iceland was in a difficult financial position following the collapse of its three biggest banks.
But sources in Reykjavik told the NRC that the authorities in Iceland are now very unlikely to make use of the loan.
Iceland’s total debt to savers in the Netherlands and Britain is some €6bn, not much less than its annual GDP. Even if it can borrow the money elsewhere, it will still find it extremely difficult to pay back savers.
Legal proceedings
Instead, the government is now considering waiting until legal proceedings are brought in Holland and Britain because of the failure of local watchdogs for the financial service sector to monitor the health of Icesave and Landsbanki.
Another loan of $2.1bn (€1.7bn) to Iceland from the International Monetary Fund is currently being held up, partly by the Netherlands and Britain. They want Iceland to commit to paying back savers as a priority.
Iceland’s prime minister estimates the country needs a further €4bn in loans to get through the financial crisis.
Norway, Poland and the Faro Islands have agreed to lend it cash, but Russia, the rest of Scandinavia, the European Union and China have turned down Iceland’s request.

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