Anger over Iceland compensation decision

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Anger over Iceland compensation decision

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Britain and the Netherlands have reacted angrily after Iceland’s President bowed to public pressure and rejected a UK, Dutch financial compensation bill.

After receiving a large public petition, the president has refused to sanction the repayment of 3.8 billion euros, an amount critics say represents 40 percent of gross domestic product.

Amsterdam and London are seeking compensation for the amount they paid out to their nationals who lost money in the collapse of Icelandic banks.

Iceland’s government maintains it is committed to honouring its debts. But the president’s rejection of the bill means it will now go to a public referendum, and recent polls show that almost 70 percent of voters oppose the compensation package.

Wouter Bos, the Dutch Finance Minister, said:

“It’s very disappointing and unacceptable for us. We’ve been extremely mild in our negotiations, we have offered the Icelandic government a low interest rate and very, very long payback times. Because we know that the Icelandic economy is in a fragile state, so we can’t ask too much of them. But what they cannot expect from us is that we let Dutch tax payers pay the bill for failure of Icelandic bankers and Icelandic supervisors.”

Observers say Iceland’s hopes of joining the EU are now in danger, and so too is crucial international aid. Britain warns that a no vote in the referendum would result in Iceland’s financial isolation.

Paul Myners, the British Financial Services Secretary, said: “I’m sure that the IMF will take this development into account, and if there wasn’t a satisfactory resolution of this matter, it is inevitably going to be an issue for Europe”.

But campaigners in Iceland say they will not be bullied, arguing they should not pay for imprudent savers who poured money into high interest Icesave accounts.