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Iceland 'to repay Icesave funds to UK and Netherlands' Iceland agrees Icesave deal with UK and Netherlands
(about 3 hours later)
Iceland has reached a deal aimed at settling the Icesave banking dispute with the UK and Netherlands, the Dutch government has said. Iceland has reached a deal aimed at settling the Icesave banking dispute with the UK and Netherlands.
Iceland has agreed to pay back the money the UK and Dutch governments spent reimbursing their citizens who lost money in the collapse of Icesave. Reykjavik has agreed to pay back the estimated 4bn euros (£3.4bn; $5.3bn) the UK and Dutch governments spent reimbursing citizens who lost money in the collapse of Icesave.
Repayments will begin in 2016 and will be completed by 2046, according to the Dutch finance ministry. Repayments will begin in 2016 and will be completed by 2046.
The agreement must now be approved by Iceland's parliament and president. The terms of the agreement must now be approved by Iceland's parliament and president.
Representatives of the three countries met in London earlier to agree the final terms of a deal. Representatives of the three countries met in London to agree the final terms of a deal.
Negotiations over repayment terms have been going on for the past two years, since Icesave's parent company collapsed at the end of 2008. Negotiations over the repayments have been going on for the past two years, since Icesave's parent company, Landsbanki, collapsed at the end of 2008.
According to the Dutch statement, Iceland will pay a fixed interest rate of 3% to the Dutch and 3.3% to the UK. Iceland will pay an interest on its outstanding debt of 3% to the Dutch and 3.3% to the UK from 2011.
This is better terms than a previous deal, later voted down by Icelandic voters in a referendum, which included an interest rate of 5.5%. Those terms are better than a previous deal, later voted down by Icelandic voters in a referendum, which included an interest rate of 5.5%.
The Netherlands will receive 1.3bn euros (£1.1bn; $1.7bn), but the statement did not specify the amount the UK would receive. The UK government put more than £2bn into the Financial Services Compensation Scheme to cover Icesave account holders. 'Mutual distress'
Lee Buchheit, a US lawyer who led Iceland's negotiating team, said the different interest rates for the UK and the Netherlands reflected the differing amounts the two countries had to pay to raise funds on the open markets.
"The negotiations focussed from our side on trying to identify a cost of funds rate," he told reporters.
"It was our view that this situation was one of mutual distress, everyone is to some degree to blame for it.
"No-one should be seeking to make any money on the transaction," he said.
The Netherlands will receive 1.3bn euros (£1.1bn; $1.7bn), the Dutch finance ministry said in a statement.
The UK government put more than £2bn into the Financial Services Compensation Scheme to cover Icesave account holders.
Mr Buchheit said the indications were that the bulk of the debt, excluding interest payments, would be covered by the sale of the assets of Landsbanki.
'New chapter''New chapter'
The repayments created a diplomatic row between Iceland and the UK, as well as political controversy in Icesave's home country. The issue of repayments created a diplomatic row between Iceland and the UK, as well as political controversy in Icesave's home country.
The then Prime Minster Gordon Brown accused his Icelandic counterpart of "unacceptable" and "illegal" behaviour after Iceland said it could not give a guarantee to reimburse UK customers of the online bank. The then UK Prime Minster Gordon Brown accused his Icelandic counterpart of "unacceptable" and "illegal" behaviour after Iceland said it could not give a guarantee to reimburse UK customers of the online bank.
In response, Icelandic PM Geir Haarde accused the UK government of "bullying" and bringing down one of its other banks after the Treasury froze the assets of Icelandic institutions in the UK.In response, Icelandic PM Geir Haarde accused the UK government of "bullying" and bringing down one of its other banks after the Treasury froze the assets of Icelandic institutions in the UK.
The UK Treasury said it looked forward to finally resolving the issue. The UK Treasury said it now looked forward to finally resolving the issue.
"Mutually satisfactory closure of this issue will mark a new chapter in UK-Iceland relations," it said."Mutually satisfactory closure of this issue will mark a new chapter in UK-Iceland relations," it said.
Iceland was plunged into a deep recession following the collapse of its leading banks, including Icesave's parent company Landsbanki, in 2008.Iceland was plunged into a deep recession following the collapse of its leading banks, including Icesave's parent company Landsbanki, in 2008.
Voters angry at having to pay for the failures of the country's financiers and politicians rejected the terms of an earlier Icesave repayment deal in a referendum in March this year.Voters angry at having to pay for the failures of the country's financiers and politicians rejected the terms of an earlier Icesave repayment deal in a referendum in March this year.
The latest talks in London included representatives of Iceland's opposition, the Dutch pointed out.The latest talks in London included representatives of Iceland's opposition, the Dutch pointed out.