Iceland has taken a step towards clearing up the mess left by its spectacular financial meltdown.
The Reykjavik government has unveiling a deal with creditors of its failed banks and a plan to provide capital for the new ones. The capitalisation – through the issue of new government bonds – is expected to total about 270 billion Icelandic crowns (1.5 billion euros). Iceland’s main commercial banks – Glitnir, Landsbanki and Kaupthing – all collapsed in the space of a week last October, owing the equivalent of more than 40 billion euros to foreign lenders. Restructuring the banking sector and repaying creditors is seen as key to reviving Iceland’s economy which is in deep recession. Reykjavik also wants to placate the International Monetary Fund and other foreign lenders that have pledged seven billion euros toward the volcanic island nation’s economic recovery. The Icelandic parliament will soon vote on whether to reimburse Britain and the Netherlands for billions owed to savers with Icelandic accounts.