Is that your final answer?

5 March 2010 By Nicholas Paisner

Icelanders are set to vote against a law to repay Britain and the Netherlands for bailing out depositors in one of its failed banks. That could delay a $5 billion IMF bailout and even lead to Iceland defaulting on its debt. But a deal is still possible even after a no vote.

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Iceland will hold a referendum on March 6 on legislation that would repay the UK and the Netherlands compensation for their bailout of depositors in Icesave, a subsidiary of collapsed lender Landsbanki. A Capacent Gallup survey conducted in late February suggested that 74 percent of Icelanders intended to vote against the legislation.

Iceland agreed in June 2009 to repay 2.4 billion pounds ($3.5 billion) to the UK and 1.33 billion euros ($1.8 billion) to the Netherlands. Repayments do not start until 2016 and are linked to growth in Iceland's GDP. But in the meantime interest accrues at a fixed rate of 5.55 percent. The referendum was triggered by President Olafur Grimsson's Jan. 5 refusal to sign the bill into law.

Iceland's government estimates that 88 percent of this amount will be covered by the assets of Landsbanki. The government is liable for any shortfall and interest.

Context News

Iceland's government estimates that 88 percent of this amount will be covered by the assets of Landsbanki. The government is liable for any shortfall and interest.

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