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Iceland strikes deal with UK and Netherlands over banking dispute

Iceland has struck a deal with the UK and the Netherlands aimed at solving the Icesave banking dispute.

The Icelandic government has agreed to pay back a total of £3.4bn which was spent by the UK and Dutch governments to cover their respective citizens who lost money in the Icesave collapse.

The repayments will take place over a 30-year span between 2016 and 2046. The terms of the deal are yet to be approved by Iceland’s parliament and president.

Representatives of all three nations had been in London this week to thrash out the deal, with negotiation between all parties wrangling on for the past two years, since Icesave’s parent company, Landsbanki, collapsed in 2008.

Iceland will pay a 3 per cent interest rate on its outstanding debt to the Dutch, and 3.3 per cent to the UK. The original deal was for a 5.5 per cent interest rate, however this was voted against by Icelandic voters in a referendum.

The difference in interest rates reflects the difference in amounts the two countries had to pay. The UK is thought to have put over £2bn into the Financial Services Compensation Scheme to cover Icesave account holders.

Speaking prior to the agreement, Chancellor George Osborne said that the UK’s decision to no longer oppose Iceland’s wish to join the European Union would have a big influence on the deal.

He said: “I think this has led to a much more constructive relationship between the Icelandic government and the British Government, which was pretty glacial, frankly.”

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