Iceland’s parliament approved on Wednesday a controversial payout of nearly 4 billion euros (US$5.7 billion) to Britain and the Netherlands, which had compensated tens of thousands of savers in a failed Icelandic bank.
Although the payout has stirred up resentment among many ordinary Icelanders hard hit by their country’s financial meltdown in 2008, lawmakers approved by a vote of 33 to 30 the measure that had threatened to become a major obstacle in the Atlantic island nation’s bid to join the EU.
“Congratulations Iceland!” shouted a lawmaker from the governing left-wing coalition after the announcement the bill had passed, while an opposition lawmaker cried out “Treason!”
PHOTO: AFP
The measure approves the payout of about US$5.4 billion to the British and Dutch governments, which had partially compensated more than 320,000 of their savers who lost money in the collapse of the Icesave online bank.
Icesave, an online subsidiary of the Landsbanki bank that had to be rescued in October 2008 as the global credit crunch hit, had attracted savers due to its high interest rates.
The British and Dutch governments turned to Reykjavik for the money to be returned, and an initial compensation deal was approved by Iceland’s parliament in August.
However, amendments negotiated by Icelandic Prime Minister Johanna Sigurdardottir in order to get the deal through parliament were rejected by Britain and the Netherlands.
The dispute threatened to sink Iceland’s efforts to quickly join the EU, forcing Sigurdardottir to return to the parliament with a new bill in line with the initial deal.
The measure adopted on Wednesday foresees staggering through 2024 the payment of the 3.8 billion euros, which is equivalent to nearly 40 percent of the country’s annual GDP.
A poll taken in August suggested nearly 70 percent of Icelanders were against the Icesave deal, the compensation amounting to about 12,000 euros for each citizen on the nation of 320,000 people.
“History will show that we are doing the right thing,” said Finance Minister Steingrimur Sigfusson after the vote.
However, Birkir Jon Jonsson, deputy leader of the opposition Progressive Party said: “How this government has handled this issue has been shameful from the beginning.”
The bill must still be signed into law by Icelandic President Olafur Ragnar Grimsson, and a petition asking him to veto the measure has already garnered nearly 40,000 signatures, a record in Iceland.
The dispute concerning the compensation scheme had also delayed the disbursement of funds under a US$2.1 billion IMF standby loan arranged in November 2008 following the collapse of Icelandic banks.
The IMF announced on Dec. 14 it had reached an agreement with Iceland on the release of a third tranche of the loan.
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