Iceland draft deal with Britain said ready

REYKJAVIK/AMSTERDAM Tue Nov 16, 2010 6:20pm GMT

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REYKJAVIK/AMSTERDAM (Reuters) - Iceland's business lobby said on Tuesday it had seen the outline of a draft deal on repaying Britain and the Netherlands and that it was much improved from one rejected by voters in March.

The head of the business lobby spoke after an Icelandic television station reported that a draft deal had been reached which would involve Iceland repaying 40-60 billion Icelandic crowns (224 million pounds) to the British and Dutch.

That is much lower than the $5 billion (3 billion pounds) that the governments paid out to investors in high-interest Icelandic bank accounts though it is understood that a big portion of the debt could be covered by a sale of assets in failed bank Landsbanki.

The Dutch and Icelandic finance ministries said no deal had been reached but that progress was being made.

"A final resolution of the matter will hopefully emerge within a few weeks," the Icelandic finance ministry said in a statement.

Vilhjalmur Egilsson, the director general of the Confederation of Icelandic Employers, told Reuters that he had had a verbal introduction to the draft by the Icelandic finance ministry.

He said it was "much improved" from the last agreement, and that the confederation would support a deal along these lines. The ministry told him that a sale of Landsbanki assets could cover some 90 percent of the debt but did not go into details about specific amounts that would be paid.

The TV report said the draft had been circulated to social partners, including the employers, and the opposition.

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The British and Dutch governments stepped in to repay the depositors when Landsbanki collapsed in 2008 and they have been trying to recover the money from recession-hit Iceland.

Dutch Finance Minister Jan Kees de Jager said a deal was close but full payment was required, news agency ANP reported.

"The Netherlands does not accept anything less than the principal plus interest," he said.

A spokesman at the ministry said it was still demanding "reasonable compensation" from Iceland over the length of time the loan was outstanding.

Bjarni Benediktssson, leader of Iceland's opposition Independence Party, denied that his party had been in a meeting at the weekend where authorities sought backing for the draft.

He said it was too early to say anything, other than that "the U.K. and Dutch authorities have reached out to meet our demands."

Sigmundur David Gunnlausson, leader of smaller opposition party, the Progressive party, also said his group had not been consulted on a deal, but added that it had been clear for a long time that Iceland could get a better deal than the original one.

The Stod2 television report and one on the website of Visir, which owns TV2, said the new agreement included an interest rate of 3 percent, also much lower than previously discussed.

It quoted "sources" for its report and said Britain and the Netherlands had also agreed a nine-month interest payment delay.

Talks over the issue were last held in September and although the issue of repayment is highly unpopular on the island, Iceland's foreign minister, Ossur Skarphedinsson, said earlier this month the issue was likely to be resolved by the end of this year.

The length of the repayment period and the interest rate to be paid on the money have been seen as sticking points to a deal.

(Additional reporting by Patrick Lannin in Stockholm and Djaja Ottenhof in Amsterdam; editing by Giles Elgood)

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