Iceland referendum may reject fresh debt repayment plan

After Iceland overwhelmingly rejected a previous loan repayment plan, under a referendum last March, Icelanders will vote today on a new plan to repay the UK and Netherlands the debts incurred when its banking system collapsed.

The new deal's repayment terms are less harsh but according to opinion polls it would be rejected again.

British and Dutch investors lost some €4 billion (£3.5 billion) when the country Landsbanki bank collapsed in 2008. Under the name Icesave, the bank had offered savings accounts in the  UK and Netherlands.

Governments in Britain and Netherlands had to reimburse 400,000 citizens who lost savings, and citizens of Iceland have to now decide on repayment of that debt.

The latest deal  envisages payment of the money with 3.3 per cent interest between 2016 and 2046 while the rejected proposal sought the money back with 5.5 per cent interest between 2016 and 2024.

However, the actual cost to the state would much less than the €4 billion owed, as, according to the government, most of the repayment would come from selling the assets of Landsbanki.