An agreement has been reached between Iceland and the UK and Netherlands governments over the Icesave crisis. The UK and Netherlands were forced to pay billions of pounds to its citizens who had money invested Icesave accounts, after its parent company Landbanki collapsed at the end of 2008.
Despite pressure to pay the money back, the Icelandic government put the decision to a public referendum in 2008, which was duly rejected as it was felt that interest charges were too high.
The three countries have continued to negotiate over the last two years, but an agreement could not be reached. However, after a meeting of representatives of the three countries in London this week, a deal has been thrashed out.
It is thought the UK government's decision to change its stance on Iceland joining the European Union has helped smooth the deal. Iceland will pay back an estimated 4 billion euros (£3.4 billion) to the UK and the Netherlands, with repayments beginning in 2016.
Under the terms of the agreement, which must be ratified by the Icelandic parliament, interest of 3% will be paid on debt to the Netherlands, and 3.3% to the UK. It is expected that the full debt will be repaid by 2046.
"The UK welcomes this new proposal from Iceland on Icesave and looks forward to successfully resolving the issue by signing a new loan agreement," said the Treasury in a statement.
"Mutually-satisfactory closure of this issue will mark a new chapter in UK-Iceland relations."
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