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UPDATE 1-Iceland plans news conference, deposit feud in focus

Published 11/14/2008, 08:23 AM
Updated 11/14/2008, 08:26 AM
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REYKJAVIK, Nov 14 (Reuters) - Iceland's government scheduled a news conference for 1600 GMT on Friday, amid speculation a resolution may be close in conflicts with Britain and the Netherlands over deposits in failed bank Landsbanki.

A resolution to the rows is considered a key step towards unblocking a potential $2 billion loan by the International Monetary Fund (IMF), money that Iceland badly needs to start to rebuild its financial system and revive trade in its currency.

The news conference would involve Prime Minister Geir Haarde and Foreign Minister Ingibjorg Solrun Gisladottir, a spokesman for the prime minister's office said but offered no further details.

The IMF and the European Union have both indicated they could be willing to stump up cash for the crisis-hit country, but that it must solve conflicts over deposits in Landsbanki's so-called Icesave accounts.

The IMF has declined to comment on delays to a decision on a a loan. But on Thursday, a spokesman said the Washington-based lender was discussing a "number of issues" raised by potential creditors, including foreign deposits.

Iceland's foreign minister, Ingibjorg Gisladottir, was hopeful a breakthrough could be achieved.

"We hope that we're reaching a solution to the dispute with the UK and the Netherlands. This is one of the most difficult international disputes we have ever been in," Gisladottir told journalists after a cabinet meeting on Friday, according to the Morgunbladid newspaper's Web site.

Three of Iceland's largest banks were taken over by the government last month.

The bank takeovers left thousands of British and Dutch savers in Internet-based accounts in Landsbanki unable to access their funds.

Britain responded by using anti-terrorist legislation to allow it to seize the British assets of Landsbanki, prompting outrage from Icelandic leaders and threats of legal action.

But Prime Minister Haarde's spokesman, Kristjan Kristjansson, said on Thursday the country was working hard to reach a settlement with Britain.

"The government's position on Icesave is to negotiate an agreement that both parties can live happily with," Kristjansson said."

(Reporting by Omar Valdimarsson in Reykjavik via the Stockholm Newsroom; Editing by Ron Askew and Victoria Main)

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