Iceland talks with UK, Dutch on debt repayment collapse with no resolution

Iceland ends Icesave talks with no resolution

LONDON — Hopes that Iceland could agree with Britain and the Netherlands over the terms of repaying $5.7 billion owed to the two countries collapsed Thursday, as officials said talks in London ended without a final resolution.

Officials from all three countries were meeting to thrash out a consensus on how to return funds spent by Britain and the Netherlands to compensate their citizens’ deposits in Icesave, an Icelandic Internet bank that collapsed with its parent Landsbanki in October 2008.

Iceland said late Thursday that the talks collapsed because “significant differences remain” about the issue.

“We had hoped to be able to reach a consensual resolution of this issue on improved terms but this has not as yet been possible,” said Finance Minister Steingrimur J. Sigfusson in a statement.

Iceland’s government wants to reach a new agreement to avoid a planned national referendum on the repayment deal, scheduled to take place March 6.

Iceland’s president vetoed the original so-called Icesave bill — negotiated with Britain and the Netherlands last summer — and ordered the legislation be put to voters following widespread support for a national petition against the deal.

The London meeting was an attempt to restart stalled negotiations after British and Dutch officials took a revised offer to Iceland last week.

Officials with knowledge of the talks said the main revision under discussion is a floating interest rate, replacing the 5.6 percent under the previous deal. The officials spoke of condition of anonymity because of the sensitivity of the talks.

Such a rate could make it cheaper for Iceland to repay its loans.

The U.K. and Dutch governments — facing depositors’ demands that their savings be recouped — said they were disappointed that the talks broke down.

“The UK and Dutch governments are disappointed that despite their best efforts over the past year and a half that the Icelandic government is still unable to accept our best offer on the Icesave loan,” a spokesman from Britain’s Treasury said.

A “no” vote at the referendum next weekend could sour Iceland’s international relations, as well as sink much-needed financial aid promised to Iceland by the International Monetary Fund and Nordic countries.

Opinion polls suggest that most Icelandic voters would reject the repayment plan.

Opponents of the deal do not object to settling debts with Britain and the Netherlands, but accuse Iceland’s creditors of wanting repayments to be made faster than the stricken nation can manage.

It is estimated the repayments will cost Iceland the equivalent of $60,000 per family.