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UK to sue Iceland for £2.3bn debt to savers

Britain and the Netherlands plan to sue Iceland for €4 billion (£3.5 billion) paid to Icesave depositors after the country voted against the payment of the money for a second time in a referendum.

UK to sue Iceland for £2.3bn debt to savers

Britain and the Netherlands plan to sue Iceland for €4 billion (£3.5 billion) paid to Icesave depositors after the country voted against the payment of the money for a second time in a referendum.

Almost 60% of Icelanders voted against a plan to pay the British and Dutch governments money owed for bailing out savers of the Landsbanki online savings arm in 2008, Britain is owed £2.3 billion of the total amount. The ‘no’ vote comes despite a revision of the original repayment plan to allow a longer period in which to pay and a reduced interest rate.

The Icelandic people do not believe the taxpayer should pay for the failure of a private institution.

Britain and the Netherlands have now said there is no more room for negotiation and will now turn to the international courts to decide who is liable to pay.

‘We have an obligation to get that money back and we will continue to pursue that until we do,’ said UK Treasury minister Danny Alexander (pictured).

Iceland prime minister Johanna Sigurdardottir said: ‘The vote has split the nation in two. We must do all we can to prevent political and economic chaos as a result of this outcome.’

Analysts have warned the outcome of the second referendum would impact Iceland’s effort to rebuild its economic relations with other countries and could be hit by a downgrading of its sovereign debt.

10 comments so far. Why not have your say?

C. B. Brighton

Apr 11, 2011 at 14:29

When something looks far to good , particularly in a competitve market like banking , depositors should have recognised the risks and asked themselves why a tiny country , with a modest population and no apparent long term international finance industry should be entrusted with their personal savings .. .

It was always an illusion but critically the UK financial regulators gave them credibility in the UK .

The Islandic people should not not bail out the UK or Dutch Governments . The Govenmentsand their quangos should perhaps sue themselves for incompetence .

This is now history and the world will soon move on . It is a drop in the ocean compared the problems of Ireland, Portugal , Greece and the rest of the latest grand illusion which we seem keen to liberally finance with no real chance of debt recovery.


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Apr 11, 2011 at 15:54

The Islanders are NOT bailing out anyone, they are renaging on their moral and legal obligations. Just because they are a small country, that does not give them the right to ride roughshod over international rules, just as they did by giving themselves an arbitraily large fishing zone during the cod war.

They have had a well above average (per-capita) living standard for many many years, as they have free geothermal energy and great natural resources for their small population. They have already lost respect by renaging on obligations, now they should be pursued by the courts.

We are already bailing out Ireland, because it might have spin-off problems with our own banks, we might bail out Portugal, even though we didn't join the Euro. To suggest we bail out Iceland, when they act immorally and illegally, and there is no reason on Earth to wish to do so, is just quite-frankly ridiculous.

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Keith Dillingham

Apr 11, 2011 at 16:04

Iceland's population is ca.318,000 so £3.5 billion represents ca.£11,000 for every man, woman and child in Iceland. They would be mad to agree to pay. It wasn't the average Icelandic citizen who lost the money. And sueing Iceland is basically flogging a dead horse. Punitive measures against the Icelandic economy will lead to impoverishment but are unlikely to recover the amound demanded. (Reparations against Germany after World War One spring to mind. Only a small fraction of the agreed amount was paid before politics intervened.) Best to agree a much reduced sum that Iceland can afford to pay and just accept that a lot of people have been stupid.

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D G Stonebanks

Apr 11, 2011 at 16:16

The banks that went bust were private businesses. They were not owned by the state and the Icelandic people have no moral or legal obligations to make good the losses suffered by those who took a risk with their savings.

The Dutch and our governments were foolish to make good the losses suffered by our savers, and the Icelandic government was failing in its duty to its own population by promising to repay the UK and Holland.

They have a small population and the debt is a massive figure on a per capita basis. If I was an Icelandic resident, I too would have voted against paying the UK or Holland, who both have larger populations and the debt is smaller for each of us. We are in deep dodo, a bit more won't make much difference.

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John B

Apr 11, 2011 at 16:22

Agree with DGS. Don't blame the Icelanders. I would definitely have voted 'No'. Blame niaive investors, corrupt bankers and our government for bailing out the savers.

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Apr 11, 2011 at 18:04

Despite all the above comments, didn't Iceland have some sort of compensation scheme akin to the FSCS in GB?? This scheme would have given investors the security to place their money in the Icelandic institutions and their reneging of this agreement means that the government has every right to get the money back. If they couldn't afford to guarantee the deposits then they should not have made the guarantee. Put simply investors were misled and the Icelandic government is culpable!!

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Apr 13, 2011 at 14:30

The government prehaps, but why the people?Private companies should not expect tax payers to bail them out. Power to the people!

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Apr 13, 2011 at 14:39

Air strikes on Reykjavik?

Britain must get this money back but comments above that the savers were foolish to invest seem wide of the mark. When I invested in Icesave, we checked the small print to make sure that if it collapsed we would be compensated.

If the UK government had not intervened, the safety of investing in an FSA regulated savings vehicle could have been in doubt.

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Tony, Wallsend

Apr 13, 2011 at 21:07

I have yet to have it made crystal clear why the Icelandic government is legally obliged to pay all of 3.5 billion. I have read that the Icelandic government is supposed to pay the first £15000 ish on Icesave deposits with FSCS left to pay the rest,also that the Iclandic government are required to pay nothing in regard of Kaupthing Edge, It being covered entirely by the FSCS through Kaupthing Singer and Friedlander Ltd a British registered company.

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Apr 14, 2011 at 12:30

So would the British taxpayer have to pay for the bailout of, say, a subsidiary of RBS in Iceland by the Icelandic government? I think not.

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