No Solution on Iceland-Britain Banking Dispute Skip to content

No Solution on Iceland-Britain Banking Dispute

Despite hopes that Iceland and Britain would reach an agreement on a loan from British authorities so that Icelandic authorities could honor their obligations to Icesave deposit-holders, a solution on the banking dispute does not seem to be in sight.

A British delegation is currently in Iceland to discuss the terms of a potential loan. “We have not accepted the legal basis for their arguments,” Iceland’s Prime Minister Geir H. Haarde told Fréttabladid.

Haarde would not comment on whether the relations between the two countries had cooled down, but emphasized that continued talks are of importance. Otherwise no solutions can be reached. “But I believe [the British authorities] have displayed quite exceptional harshness, which has shocked Icelanders.”

Negotiation committees on behalf of the Icelandic and British governments discussed the Icesave dispute during a long meeting in Reykjavík yesterday and will continue their talks today.

Haarde would not comment on whether a solution to the dispute can be expected shortly but emphasized that, if need be, the case will be taken to the courts, the conventional forum for resolving disputes on legal matters. Last week the prime minister announced that his government had hired an international law firm to look into Iceland’s legal position.

According to Fréttabladid’s sources, British authorities demand that Landsbanki’s assets in the UK be used to cover the bank’s debts in the country other than what it owes account holders in its online banking unit Icesave.

That demand is not at all in line with the policy of the emergency legislation recently accepted by Iceland’s Althingi parliament, which assumes that Landsbanki’s assets in the UK will be used to repay Icesave deposit-holder.

Haarde would not confirm that statement.

In terms of a potential application for a loan from the International Monetary Fund (IMF), Haarde said that work on a new economic forecast has delayed his government reaching a formal decision on the matter.

“There are many factors that we have to be taken into account, which may have changed drastically from what they used to be, so it is a lot of work and certain difficulties are involved in forecasting these figures,” the prime minister said.

Haarde added that it is clear that gross national product (GNP) will decrease and unemployment will increase. “Inflation depends on how we succeed in balancing the currency.”

Steingrímur J. Sigfússon, leader of the Left-Greens, the largest opposition party, said he is fairly certain that one of the terms of a loan from the IMF is that Iceland and Britain reach an agreement regarding Icesave.

Click here to read more about a potential IMF loan.

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