Iceland to repay Icesave’s £3.5 billion debt to UK and Netherlands

Iceland's parliament yesterday voted in favour of repaying nearly £3.5 billion to the UK and the Netherlands following the collapse of Icelandic online bank Icesave during the height of the global financial crisis last year.

Although Iceland had reached a preliminary deal with the UK and the Netherlands in June that required the approval of the parliament, angry Icelanders had staged protests against the debt bill of its bank that could lead to the country going bankrupt.

After weeks of political debate, members of parliament added amendments to the bill putting a ceiling on the repayment based on the country's gross domestic product.

In the vote, 34 members voted in favour, 14 against and 14 abstained.

Britain, which along with the Netherlands agreed in June to lend Iceland money to repay Icesave customers, said it welcomed Iceland's commitment "to meeting its obligations," but added it would look carefully at the conditions placed on the loan "to ensure that they are reasonable".

Iceland will begin repaying £2.3 billion to the UK and £1.14 billion to the Netherlands over 15 years from 2016 at 5.5 per cent interest.