Iceland president vetoes repayment to UK

| January 5, 2010
”Iceland

Icelandic President, Olafur Ragnar Grimsson, has vetoed the repayment of a £2.3 billion loan to the UK Government.

The debt relates to the collapse of Landsbanki which collapsed at the height of the banking crisis in autumn 2008 and 300,000 British savers saw their accounts frozen with the bank’s online Icesave brand.

The Treasury stepped in with a 100% guarantee for individual savers and paid the £2.35 billion in compensation.

Last week, Iceland’s president announced plans to hold a referendum on the payment of compensation following the collapse of the Landsbanki.

However, it was revealed today that President Olafur Ragnar Grimsson vetoed the bill which would have enforced the repayment of the money by 2024.

A spokesperson for the UK Treasury said: “The Treasury will consult with colleagues in Iceland to understand why this bill has not been passed and will work with them, the Netherlands and within the EU to resolve this issue as soon as possible.

“The UK Government expects Iceland to live up to its obligations.”

As well as UK savers, thousands of Dutch savers were hit by the demise of Landsbanki and today the Dutch Government said that it was “extremely disappointed” by the veto.

“The Netherlands maintains that Iceland is compelled to pay back the money” said a spokesperson.

Separately, Kaupthing, which was once Iceland’s largest bank, along with Glitnir and Landsbanki, all had to be nationalised at the height of the banking crisis.

This led the Iceland Government to seek billions of dollars worth of aid from the International Monetary Fund, as well as a loan from the European Union to help it survive the financial turmoil.

Last month, it was revealed that Iceland’s economy plummeted at its fastest pace on record in the third quarter, falling by 5.7% compared to the previous quarter.

However, on an annual basis the economy contracted by 7.2% – the biggest fall on record.

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