Iceland sees end to Icesave dispute

2nd September 2011, Comments 0 comments

Iceland said Friday it expected a stand-off with Britain and the Netherlands over the failed Icesave bank could be resolved as assets at the lender's parent company would cover all depositor claims.

"I think this news should put the Icesave issue in a completely new light," Icelandic Economy Minister Arni Pall Arnason told AFP.

His comment came a day after Icesave's parent company Landsbanki, which collapsed at the end of 2008, announced that its recovered assets would be enough to repay all "priority claims" and still have 13 billion Icelandic kronur (80 million euros, $114 million) left over.

"The positive trend continues that cash is being acquired for the bank's claims more rapidly than estimated," the Landsbanki winding-up board said in a statement.

Icelandic voters have twice rejected by referendum deals to use tax-payer money to refund 3.9 billion euros ($5.6 billion) to Britain and The Netherlands for money they spent on compensating 340,000 of their citizens who lost money in Icesave.

The European Free Trade Association (EFTA)'s surveillance authority ESA has warned the island nation it would be taken to court if it did not pay the money, while Britain and the Netherlands have hinted they could trip up the country's EU bid.

But on Friday, Arnason said he expected the case would be closed following the Landsbanki announcement, which cleared the way for compensation to be paid "not only for deposits covered by the minimum insurance guarantee but also deposits exceeding that guarantee."

Due to a clause in the emergency legislation introduced in Iceland as its once booming financial sector imploded in late 2008, all deposits in the bank were considered priority claims, Arnason explained.

This meant that even "deposits beyond the limit insured for example by the Dutch authorities of 100,000 euros, and deposits by the local municipalities and charities in Britain which were not covered by the guarantee" would be reimbursed, he stressed.

He said the government expected repayment to begin before the end of the year.

While Britain and the Netherlands might still be sore that Iceland refused to pay interest on the money, which was the main sticking-point in the referendums in March 2010 and April 2011, Arnason stressed they would also get "money back that they would not have gotten back if the Icelandic government had not given their depositors priority status.

"I think there is a certain equilibrium there that we need to focus on which should allow us to take a fresh look at this issue."

Arnason said the government had always been "reluctant to accept that there was an underlying obligation of the Icelandic tax payer to cover obligations of failed private banks.

"As we see it now, these developments have allowed us to solve this issue without hurting the Icelandic tax-payer anymore than has been unavoidable as a result of the crisis," he added.

© 2011 AFP

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