Iceland expects to sign a new deal on "Icesave" debts with Britain and the Netherlands within weeks, limiting the fallout from a widely expected rejection of the current accord in tomorrow's referendum over foreign debts.
A new agreement over repayment for $5 billion in "Icesave" debts to Britain and the Netherlands is key to unblocking vital foregin aid to the North Atlantic island state, especially if the ballot as expected nullifies the deal reached in late 2009.
Prime Minister Johanna Sigurdardottir said talks on a new Icesave agreement had made "considerable" progress.
"The gap is narrowing," she told reporters after a cabinet meeting. "We don't have much time to finish this, the impact on our economy and business is already too high."
Tomorrow's vote is on whether to approve a deal struck late last year on paying money back to Britain and the Netherlands, after they compensated savers in the countries who had lost money in accounts run by an Icelandic bank.
Polls show Icelanders are set to soundly reject the 2009 agreement.
The referendum also has sparked concerns over political stability since Ms Sigurdardottir's government had negotiated it and, until recently, argued that approving it was the best of some bad choices.
"It is a great misunderstanding that this referendum is about the life of this government. We have no intention of resigning," said Ms Sigurdardottir, adding that she will not participate in tomorrow's referendum.
Despite the negative consequences of rejecting the deal, Icelanders have no real incentive to approve it. Furious about what they see as overly harsh terms from their creditors, they are now certain they can get a much better deal.
Reuters