Iceland says 'no problem' repaying debt as litigation looms

10th April 2011, Comments 0 comments

Iceland insisted Sunday it has "no problem" repaying its debts as litigation loomed over voters' rejection of a deal to reimburse The Netherlands and Britain for the collapse of Icesave bank.

"The Icelandic state has absolutely no problem in repaying its debts," Finance Minister Steingrimur Sigfusson told a news conference the day after voters gave a resounding "no" to a proposed deal for repaying 3.9 billion euros ($5.6 billion) to the two countries.

"Iceland's reserves are more than enough to cover all the payments in the coming years," he added.

The Netherlands and Britain, meanwhile, expressed disappointment with the result and said litigation was the only avenue left.

"It now looks like this process will end up in the courts," Chief Secretary to the Treasury Danny Alexander told BBC television.

Dutch Finance Minister Jan Kees de Jager added: "The matter is now in the hands of justice".

With 70 percent of ballots counted, the "no" vote led with 57.7 percent against 42.3 percent for "yes", a result that has embarrassed Reykjavik.

Around 230,000 voters were asked to decide on the proposal to repay Britain and The Netherlands the money they spent on compensating 340,000 of their citizens who lost money when Icesave, an online bank, went under at the height of the global financial crisis in 2008.

The latest deal, laboriously negotiated among the three nations over more than two years, was considered more favourable to Iceland than a previous accord rejected with a 93 percent majority in a referendum in early 2010.

It would have allowed Iceland to repay the debt gradually until 2046, at a 3.0 percent interest rate for the 1.3 billion euros it owes The Netherlands and at a 3.3 percent rate for the remainder owed to Britain.

The amount worked out to some 12,000 euros per citizen of the 320,000-strong island nation, before interest.

The Hague and London said the time for talking was over, and that the matter would have to be resolved before the European Free Trade Association (EFTA) Court, which plays the role of the European Court of Justice for European Economic Area (EEA) members Iceland, Liechtenstein and Norway.

A negotiated outcome would have been preferable, Alexander said in London.

But, "we had an obligation to people in this country who'd saved with those banks. We have an obligation now to get that money back, and we will continue to pursue that until we do."

Dutch finance ministry spokesman Niels Redeker added: "The procedure (before the EFTA court) will resume its course."

Sigfusson said his government wanted a "rapid solution" to the impasse, and would cooperate with the EFTA Surveillance Authority, which monitors compliance with EEA rules, regarding the court procedure, which could last "a year to 18 months".

American lawyer Lee Buchheit, who negotiated the deal for Iceland, noted that the authority had concluded in an earlier, preliminary report, that Iceland "had failed in its responsibilities".

The referendum result has also had domestic political repercussions, with the conservative opposition demanding new elections.

"The government has received a slap in the face," said opposition leader Bjarni Benediktsson.

Iceland's Prime Minister Johanna Sigurdardottir said she was disappointed with the result of the referendum, regarded as crucial for a country negotiating to join the European Union.

The result was a "shock" for parliament, which had approved the deal with a 70 percent majority before it was referred to a referendum, she added.

© 2011 AFP

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