June 10, 2011 / 3:22 PM / 8 years ago

Iceland told again to repay debt to UK, Netherlands

REYKJAVIK, June 10 (Reuters) - Iceland must repay its Icesave-related debts to Britain and the Netherlands within three months, a European trade body ruled again on Friday, keeping legal pressure on the North Atlantic island.

An Icelandic minister said the two countries would get their money, although the Icelandic government would not guarantee the payments — 99 percent of which will be covered by the estate of collapsed lender Landsbanki.

The debt was incurred after Iceland’s banking sector crumbled in late 2008.

The two European Union nations have paid off depositors who had money frozen in high-interest “Icesave” accounts with lender Landsbanki, and they want their money back in a bill amounting to about $5 billion.

In a second ruling against Iceland, the body overseeing the rules of the EFTA trade bloc told the North Atlantic nation it must comply with the rules of a deposit guarantee scheme.

“The Icelandic Government is now requested to take the measures necessary to comply with this reasoned opinion within three months,” the EFTA Surveillance Authority (ESA) said.

The European Free Trade Association (EFTA) includes Iceland, Norway, Liechtenstein and Switzerland.

“Should Iceland not comply, the Authority will need to consider taking the case to the EFTA Court.”

A spokesman for ESA said the court could not apply sanctions to Iceland.

The Icelandic government asked the authority to drop proceedings in May.

It has said that payments from the estate of Landsbanki to Britain and the Netherlands would begin later this year and that most of the debt would be covered, but no set timeframe has been given for payments.

“It will have to be the ESA’s (Surveillance Authority) own decision whether to take us to court, but it is clear that the Landsbanki estate guarantees 99 per cent of the full amount,” state broadcaster RUV quoted Economy Minister Arni Pall Arnason as saying. (Reporting by Omar Valdimarsson, writing by Mia Shanley in Stockholm; Editing by Hugh Lawson)

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