Icelanders refuse to pay

UK and Dutch investors lost 3.5 billion pounds and USD 5.8 billion (a total of almost 4 billion Euro) in the “Icesave” saving accounts ran by Landsbanki of Iceland that collapsed in 2008 almost simultaneously with Glitnir and Kaupthing, two other major banks in that country. The British and Dutch governments reimbursed 400,000 of their citizens and claim that Iceland has to repay that money. Icelanders consider they are under no legal obligation to pay for a private bank's losses and complain that the deal would put a heavy burden on the nation. The sides are in a process of negotiations to settle the issue but diplomatic tensions are mounting. The government of Iceland compensated national savers but refused to repay overseas customers although repayment could come from selling the assets of Landsbanki at a cost not exceeding 50billion kronur (£168m) from government coffers.

A first plan to repay the debt with a 5.5% interest between 2016 and 2024 was rejected by 93% of Icelanders in a March vote. A second plan, to settle the debt over 30 years (2016-2046), with 3.3% interest to the UK, and 3% to the Netherlands was backed by the Parliament of Iceland, but President Olafur Ragnar Grimsson turned it down, thus leading to the new referendum. Icelanders refused this second plan in the April referendum that resulted in a 58% NO and only 42% supporting the deal.

The case may be referred to an international court that is expected to issue a ruling within several years. A third attempt to convince voters to accept a repayment deal seems to be excluded. Delaying settlement blocks Iceland's return to the financial markets to receive funding and keeps prospects for economic recovery slim.

Iceland intends to join the EU but has no chances to get the support of the two creditor countries.