Iceland told to repay British, Dutch governments on Icesave

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European trading watchdogs on Friday gave Iceland three months to repay the British and Dutch governments for compensation they gave to depositors in failed bank Icesave.

"Iceland is obliged to ensure payment of the minimum compensation to Icesave depositors in the United Kingdom and the Netherlands," said a statement on the website of the Belgium-based European Free Trade Area (EFTA) surveillance authority.

According to a legal requirement under the treaty governing relations across the European Economic Area, which adds Iceland, Norway and Liechtenstein to the 27-state European Union single market, Reykjavik cannot escape minimum compensation payments.

"Iceland was obliged to guarantee 20,000 euros per depositor after Landsbanki and its Dutch and British branches, called Icesave, collapsed in October 2008," the authority said in an opinion sent to the Icelandic government.

"By leaving the depositors in Icesave's Dutch and UK branches without that minimum guarantee, Iceland acted in breach of the directive," it said.

Iceland saw all its major banks go belly-up in the financial crisis at the end of 2008.

Britain and the Netherlands dished out a total of 3.9 billion euros ($5.5 billion) to reimburse some 340,000 of their citizens hit by the collapse of Icesave.

On April 9, about 60 percent of voters in a referendum rejected the Icesave deal approved by the government and parliament, just over a year after more than 93 percent of voters turned down a previous plan, in March 2010.

Should Iceland not comply, the authority said it would "need to consider taking the case to the EFTA court."

© 2011 AFP

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