Britain is prepared to be flexible in reaching a solution with Iceland to repay debts, finance minister Alistair Darling said on Sunday, adding it would take many, many years for Britain to be reimbursed.
Icelandic voters overwhelmingly rejected on Saturday a $5 billion deal to repay debts to Britain and the Netherlands which arose after Iceland's top banks failed in 2008.
The fundamental point for us is that we get our money back but in terms of the terms and conditions, and so on, we are prepared to be flexible, because it's not in our interest to have Iceland excluded. We want Iceland to be part of mainstream Europe, and this is just part of that process, Darling said in a BBC television interview.
The outcome of the referendum had not been in doubt since Iceland had recently been offered better repayment terms than those contained in the deal on which residents were voting.
Iceland now must go back to the negotiating table with the British and Dutch in hopes of striking a new accord swiftly.
Darling said Britain would get its money back.
The argument isn't about whether the sum that we had to put in to look after British savers should be repaid. It's about the terms and conditions. Actually we've been in discussion with the Icelandic government now for several weeks. We put an offer to them again last week. They said they would have to wait until after the referendum, he said.
I don't think there's any question (that) the principle for us is that we get out money back. I'm prepared to talk to them about the terms and conditions, as is the Dutch government too, he said.
Darling said that, on any view, it would take many, many years before the money would be repaid.
You couldn't just go to a small country like Iceland with a population I think about the size of Wolverhampton and say ... repay all that money immediately, he said, referring to a medium-sized English Midlands city.
We've tried to be reasonable, he said.
Assets that would come in from the now liquidated bank would be set against the money owed, he said.
Iceland desperately needs to solve the so-called Icesave impasse so it can get international aid flowing to its economy, which contracted around 7.7 percent last year and is expected to shrink again in 2010.
About 400,000 savers in Britain and the Netherlands had deposits with one of the banks in Icesave online deposit accounts. The two countries compensated the savers and since then have demanded their money back.
The Dutch have appeared to harden their position by linking the Icesave dispute to Iceland's hopes of joining the European Union. Brussels invited Iceland to accession talks last month.
(Reporting by Adrian Croft; Editing by Stefano Ambrogi and Jon Loades-Carter)