Iceland seeks deal on $8.1b bank debt

LONDON - Icelandic officials yesterday met representatives of Britain and The Netherlands in London hoping to strike a new deal on returning US$5.7 billion ($8.1 billion ) owed to the two countries following the collapse of the Icesave online bank.

A five-delegate negotiating team - led by attorney Lee Buchheit, of the New York-based office of Cleary Gottlieb Steen & Hamilton held talks at the Iceland Embassy in London, the country's Finance Ministry said.

Iceland's Government is seeking to renegotiate the terms of a deal to return funds spent by Britain and The Netherlands to compensate their citizens' depositors in Icesave, an internet bank that collapsed with its parent Landsbanki in October 2008.

The Government hopes a new repayment deal would allow it to avoid a planned national referendum on the repayment deal, scheduled to take place on March 6.

Iceland's President vetoed the so-called Icesave bill and ordered the legislation to be put to voters following widespread support for a national petition against the deal.

The InDefence grassroots organisation, which drafted the petition, has previously accused the British and Dutch Governments of being "engaged in economic warfare against Iceland".

"At this meeting the negotiation committee presented a proposal for a new solution to the Icesave dispute, based on the agreement reached between government and opposition parties in the Icelandic Parliament," Iceland's Finance Ministry said.

The ministry said "the parties are assessing the situation."

It said Iceland's delegation was being advised by Donald Johnston, the former secretary-general of the OECD.

Iceland's Government is seeking to avoid the planned referendum, mainly as a "no" vote could lead to a block on much-needed financial aid promised to Iceland by the International Monetary Fund and Nordic countries.

Opponents of the deal do not object to settling debts with Britain and the Netherlands, but accuse Iceland's creditors of wanting repayments to be made faster than the stricken nation can manage.

It is estimated the repayments will cost Iceland the equivalent of US$60,000 per family.

- AP