Icelanders march against Icesave deal

About 3,000 Icelanders took to the streets on Thursday to protest against a proposal to repay the losses sustained by Dutch and British savers in the Icesave bankruptcy.

The legislative proposal has been stuck in the Icelandic parliament for months, where it is being blocked by a majority of members of parliament.

The Icesave law is a promise to repay the money advanced to Iceland by the governments of the Netherlands and Britain to reimburse Dutch and British savers for the money they lost in the bankruptcy of the Icelandic bank in October 2008.

Under a European agreement, Iceland is under the obligation to repay the first 20,887 euros to each investor. Because Iceland is virtually bankrupt itself, The Hague and London agreed to advance the money.

But the agreement has been fiercely criticised in Iceland itself, where some taxpayers are saying they refuse to cover for the bank's losses. The group which organised Thursday's demonstration, InDefence, says it wants to see "a fair deal over Icesave".

In an opinion article in Friday's Financial Times, Icelandic prime minster Jóhanna Sigurdardóttir asked for understanding for Iceland's difficult position.

"Iceland has been accused of a tendency to imagine a British or Dutch conspiracy behind any bad news," Sigurdardóttir wrote. "Iceland has no such tendency. My government ... has to deal with the aftermath of the fall of nearly all of Iceland’s privatised banking sector.

"Icelanders, who do not feel responsible for the global banking crisis, are willing to make sacrifices to secure normal relations and trade with the world. But they are angry at having to take on the burden of compensation for the Icesave savings accounts of Landsbanki – a failed, privately owned, commercial bank, which attracted hundreds of thousands of UK and Dutch savers with high interest rates."

Sigurdardóttir said Iceland remains committed to fulfilling its international obligations, but she pointed out that the amount to be shouldered is "huge – about 50 per cent of our gross domestic product".

About 120,000 Dutch savers placed a total of 1.6 billion euros with Icesave in better times. Most have since been reimbursed by the Dutch government up to 100,000 euros per account.