Wednesday 03 December 2008 | Financial Crisis feed | All feeds


UK Treasury lends Iceland £2.2bn to compensate Icesave customers

The UK is loaning Iceland £2.2bn to help the struggling country pay compensation to British customers of the failed internet bank Icesave.

A peaceful protest in Iceland against government and banking officials ended with a police charge after hundreds rioted outside a police station. ;

The loan is part of a $10.1bn (£8.5m) package brokered by the International Monetary Fund, which delayed its decision on economic aid for Iceland while the country refused to accept liability for compensating foreign customers.

A joint statement from the British, Dutch and German governments yesterday confirmed that they would give Iceland a combined $6.3bn in loans to cover the cost of compensating account holders.

Iceland ended its dispute with the three countries' governments earlier this week, when it finally admitted liability for the first £18,000 lost by each Icesave customer.

"As part of the international support for Iceland, the UK, Netherlands and Germany will work constructively in the continuing discussions with Iceland to conclude agreements on pre-financing that enables Iceland to meet its obligations towards depositors shortly," the joint statement said.

The IMF finally pledged $2.1bn to help Iceland on Wednesday night, paving the way for other countries to offer their support.

Scandinavian countries confirmed they would lend Iceland $2.5bn. Poland has pledged $200m and the Faroe Isles offered $50m in loans, after Iceland's banking system and currency collapsed last month.

Jeff Randall
Ambrose Evans Pritchard
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