Iceland braces for referendum on Icesave debt as talks fail
02 Mar 2010
Hectic talks between Iceland and the British treasury over the repayment of a $5-billion bailout loan hit road blocks on Saturday after the Nordic country's government insisted that the proposed interest bill was too burdensome for the small nation.
According to reports, the standoff could have far-reaching implications for Iceland because it threatens to cut the country off from much-needed funding from the International Monetary Fund and other countries in the Nordic region.
It also endangers its application to join the European Union.
However, Johanna Sigurdardottir, the Icelandic prime minister, said that she hoped a deal was still possible ahead of the 6 March referendum, which is expected to reject the proposal to repay the money.
The British and Dutch governments agreed to extend a rescue loan to Iceland at the height of the banking crisis in 2008 to safeguard the deposits of UK charities, local authorities and individuals who had invested with Icesave, the online bank that went bust during the global financial crisis.
On 31 December the Iceland parliament, in a narrow 33 to 30 vote, approved a bill to repay the money to Britain and the Netherlands to cover the losses of depositors in Icesave (See: Iceland to repay €3.8 billion to British, Dutch investors).
