Iceland's finance minister said today he backed a deal with Britain and the Netherlands over debts incurred in a bailout of depositors in a failed bank, while opposition parties were more cautious.
Icelandic negotiators said yesterday they had a draft deal offering better terms than one rejected by voters in March for repaying the $5 billion (€3.8 billion) the two countries spent reimbursing British and Dutch Icesave account holders.
"The agreement is a giant step in the economic recovery of this country," Steingrimur Sigfusson told Icelandic state radio in his first comments on the new agreement.
Mr Sigfusson said the delay in finalising the agreement had been costly for Iceland.
He said the exposure was "limited as we now know the value of the assets" of Landsbanki, which ran the Icesave accounts and went bankrupt, which will cover "most, if not all", the debt.
"This agreement is made under totally different circumstances from the previous one when lending rates were much higher and our currency reserves were limited," Mr Sigfusson said.
Under the agreement, Iceland expects a recovery of the assets of Landsbanki to repay the $5 billion of principal, which it has to start repaying from 2016. Iceland will start paying interest from 2011, with interest accruing from October 2009.
The negotiators expect the interest to cost the treasury less than 50 billion crowns (€329 million), assuming 20 billion crowns is paid from a state deposit guarantee fund.
Bjarni Benediktsson, leader of largest opposition party, the Independence Party, was quoted by local media last night as saying the ruling Social Democratic-Left Green government had to "own up to its mistakes over the previous agreement".
He declined to say whether he would support the new deal.
Sigmundur Gunnlaugsson, head of smaller opposition group the Progressive Party, which criticised the earlier Icesave deal, told media group website www.visir.is that he thought it would be "the right thing to do to refer this agreement, like the previous one, to the people in a national referendum".
Reuters