The Hague threatens Iceland's EU bid over lost savings

Iceland capital Reykjavík
By our news staff

To put pressure on Iceland to meet agreements about compensation for Dutch savers who lost money in the Icesave bankruptcy, Dutch foreign minister Maxime Verhagen told his Icelandic counterpart that he could block its bid to join the European Union.

Verhagen called Ossur Skarphédisson on Tuesday evening to talk about the stalemate in the Icesave repayment. The Icelandic parliament, the Althing, has postponed a decision on the reimbursement agreement made by the government for Dutch and British victims of the Icesave debacle. A total of 128,000 Dutch savers had some 1.7 billion euros in accounts in this web-based subsidiary of the Landsbanki bank, which was nationalised by the Icelandic government in October 2008.

According to the agreement Iceland has to repay 1.3 billion euros to the Netherlands and 2.3 billion to the UK. The British and Dutch governments spent that money to compensate savers for the 20,000 euros the Icelandic government had guaranteed for those saving with Icelandic banks. The Icelandic government agreed to repay those damages in the form of a loan, but parliament could block that deal, as some members of the Althing have threatened to do.

"A solution to the problems surrounding Icesave could speed up the handling of the Icelandic application for EU membership," Verhagen said. He added it is "absolutely necessary" that Iceland approves the agreement to "show that Iceland takes EU guidelines seriously".

Iceland has been hit especially hard by the credit crisis. Last week, it formally announced it is eager to join the European Union. The 27 foreign ministers of the member states said they will discuss the request at a meeting in Brussels on Monday.

In a reaction, Skarphédisson called Verhagen's remarks "an internal Dutch political issue". Iceland's finance minister Steingrímur Sigfússon said there can be no connection between the Icesave agreement and admission to the European Union.

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