Iceland is near an agreement with Britain and the Netherlands over savings accounts frozen when the North Atlantic island-nation's banks collapsed last year, Reuters quoted the Icelandic government as saying today. Prime Minister Johanna Sigurdardottir said the agreement being negotiated on the Icesave accounts of Landsbanki, which collapsed along with its main Icelandic peers in October, would give Iceland seven years to reimburse the savings. The Icesave affair led to a nasty diplomatic dispute between Britain and Iceland, one which for a time delayed financial assistance for Reykjavik. Britain, with some 300,000 savers affected, used anti-terror legislation to seize Icelandic assets and Iceland threatened to sue the British government. "I'm hopeful that we'll see the end of this matter shortly. This is an acceptable solution given the circumstances," Sigurdardottir told state radio after a cabinet meeting. The debt owed on the accounts totalled about 640 billion Icelandic crowns ($5.28 billion), which would be repaid at 5.5 percent interest, Sigurdardottir said. "This is a much more agreeable solution than we were looking at in the winter," she said. "The interest rates are lower, we'll have longer time to pay out and last, but not least, it means the assets of Landsbanki in the UK will cover most of the debt." Iceland's main commercial banks collapsed as the global financial crisis left them starved of the easy credit necessary to service billions of dollars of debt accumulated over years of rapid overseas expansion. The crisis reverberated across Europe where hundreds of thousands of savers had been attracted by the high interest rates offered by Icelandic banks on accounts such as Icesave. Sigurdardottir said the accrued interest on the debt would be paid at the end of the seven-year period. Exactly how much of the bill would in the end be footed by the Icelandic Treasury remained to be seen, she added. "Valuation firms that have worked on this for us estimate that the Landsbanki assets could cover as much as 95 percent of the total amount," she said. "It could, of course, turn out to be less but I still believe that this is manageable, assuming that the three countries involved, Iceland, the UK and the Netherlands will finalise the agreement along these lines." Landsbanki's British assets would be sold during the course of the seven year-period, she added.
