Iceland reaches deal for foreign savers, key for aid

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(Agencies)
Updated: 2008-11-17 11:10

The Netherlands said it would extend a loan of 1.3 billion euros to Iceland to make this possible. Dutch authorities would then compensate depositors for anything above that amount up to 100,000 euros.

As of Friday, a Dutch finance ministry spokeswoman said the legal documents to flesh out the memorandum of understanding had not been finalised.

Iceland faces a severe recession after the global financial crisis led to the collapse of its crown currency and the government takeover of three of its largest banks. It badly needs funds to revive currency trade and restart the economy.

The government said on Sunday the Icesave deal would allow for the "expeditious finalisation" of talks over financial aid.

Haarde said money to cover the Icesave payouts would come from the sale of the assets of the three nationalised banks.

"The European countries are aware of our situation and we have pledges to the effect that we will not be made to shoulder more than the nation is able to," Haarde said.

"Terms and conditions of the support we are now expecting from the European countries are still to be decided."

Iceland reached a provisional deal for a $2 billion IMF lifeline in October and other lenders, including the EU and Nordic neighbours, had indicated they could be willing to stump up cash once the IMF programme won official approval.

IMF Managing Director Dominique Strauss-Kahn told a news conference in Washington on Saturday that the lender would finalise a rescue package for Iceland on November 19.

The country, whose government has long opposed EU membership, has shown signs of warming to the idea of joining the 27-nation bloc to help avert future crises.

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