UK, Iceland in contact on Icesave, no new meetings

 @ibtimes
on February 28 2010 4:40 PM

Icelandic negotiators may return home on Monday from London if no new meetings are called with British officials over the Icesave debt crisis, Icelandic Radio quoted a finance ministry spokesman as saying.

Officials from the two countries met in London on Saturday but the radio station said no formal meetings took place on Sunday, although the negotiating teams had been in contact.

Iceland is at loggerheads with Britain and the Netherlands over terms for repaying them more than $5 billion.

Iceland wants a new deal to avoid a referendum on March 6 on a previous agreement which the island's voters are almost certain to reject, undermining the government's credibility and delaying access to vital economic aid.

The two countries compensated British and Dutch depositors over the 2008 collapse of Iceland's Landsbanki, which had offered high-interest online accounts under the Icesave brand. Now they want their money back from Iceland.

Iceland desperately needs to solve the impasse in order to get access to foreign capital to restart its economy, which contracted around 7.7 percent last year and is expected to shrink further this year.

An earlier round of talks broke down last week after Reykjavik rejected an offer from Britain and the Netherlands which included easier repayment terms.

The International Monetary Fund and Nordic countries have promised to lend Iceland around $4.5 billion, but the money is on hold pending resolution of the Icesave debt.

The debt amounts to more than $15,000 for each of Iceland's 320,000 people, though most of the money is likely to be covered by the sale of Landsbanki assets.

Many Icelanders believe they should not bear the whole burden and blame weak oversight of banks by overseas regulators.

Icelandic media reported on Saturday that the Dutch were not part of the latest talks as the government collapsed this month and the country has a caretaker administration until elections in June.

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