Jan 8 (Reuters) - Icelandic lawmakers met on Friday to set a date for a crucial referendum on the Icesave law, which sets the terms for repaying Britain and the Netherlands billions lost by their savers in Iceland's banking collapse.
Here are some facts about the issue:
COLLAPSE:
- All three of Iceland's banks collapsed within days of each other in October 2008, brought down when credit dried up in the global crunch, leaving them unable to sustain their heavy debt burdens.
- Iceland's government took over the banks' domestic operations and compensated Icelandic savers for lost money, but savers in other countries with Icelandic accounts were left out in the cold.
- Around 400,000 savers in Britain and the Netherlands had accounts with Landsbanki when it collapsed.
- Britain and the Netherlands recompensed in full individual savers who lost money. Iceland agreed to pay this money back to the two countries, but settling the terms under which this will happen has proved tough.
DEBTS
- Iceland owes Britain a maximum 2.35 billion pounds ($3.75 billion) and the Netherlands 1.2 billion euros ($1.72 billion), plus interest. The final amount depends on how much money is recovered from the sale of assets owned by Landsbanki. Britain's Guardian newspaper said Landsbanki's assets were currently valued at 2.35 billion pounds.
REPAYMENT
- In June 2009, Reykjavik said it had reached a deal with Britain and the Netherlands. Under the deal, the Iceland Compensation Scheme would make payments over 15 years, with an initial 7-year grace period. Interest was set at 5.55 percent.
- In August, parliament passed a law agreeing to repay the British and Dutch, introducing amendments to the agreement with the UK and the Netherlands.
- The August law includes a cap on payment as a percentage of the increase in the country's gross domestic product. Up to 4 percent of annual GDP growth can be paid to Britain in sterling terms from 2017 to 2023 and up to 2 percent in euro terms to the Netherlands. The bill stipulates that a guarantee on repayment would be valid until June 2024.
- Britain and the Netherlands indicated that the repayment terms were unacceptable and a new round of negotiations started.
- In October, Iceland announced a new deal had been reached. The ceiling on GDP repayment remained.
- The October deal also included an agreement that Iceland can pay back debt more frequently and can voluntarily repay in excess of the mandatory amount.
- The government's guarantee was extended in five-year periods should the loans not have been fully repaid by 2024.
- On Dec. 30, parliament passed the amendments to the original Icesave bill by a slim majority.
- On Jan. 5, President Olafur Grimsson refused to sign the bill, triggering a referendum. The new bill has become law, but would be repealed by a no vote in a referendum. If there is a no vote, the old law returns to force.
(Sources: Iceland government, Reuters)