[James Calloughan, EU and Financial News Contributor]
BBC News: Cash-strapped Iceland‘s troubles have re-emerged as despite it successfully avoiding bankruptcy and civil unrest as a result of its total financial collapse brought about by the global financial crisis. according to a recent BBC News report. That is because it seems that a new financial storm is brewing for the embattled country as its trading partners, the UK and the Netherlands, are taking it to court for no less than 4bn euros (£3.5bn) which represent deposits that had been lost when all three of Iceland’s largest banks went down during the start of the global financial crisis.
The causes of the banks’ crash were recognized the artificially high interest rates, huge amounts of incoming deposits from all over the world, inflation of the krona which meant that the banks’ were unable to roll over their loans as the central bank of Iceland had less money than the ones asking for it.
Originally Iceland would have had to repay the money with 3.3 per cent interest to the UK and 3 per cent to the Netherlands over more than thirty years. However, Iceland’s citizens rejected the idea to pay as such in a referendum, and now Iceland is facing legal proceedings which are likely to end up in substantial legal expenses and raised interest rates.
And pay they must, as pointed out by Dutch Finance minister Jan Keenes de Jager.
- Icelanders Reject Repayment – Wall Street Journal (news.google.com)
- Icelanders Reject Deal to Repay UK, Netherlands – Wall Street Journal (news.google.com)
- In Iceland’s Rejection Of Debt, A Sovereign Paper Warning (247wallst.com)
- Britain to sue Iceland for £3.5billion after country voted to reject plans to repay debt (dailymail.co.uk)
- Iceland Rejects Deposit Repayments to British, Dutch (online.wsj.com)
- UK and Netherlands to sue Iceland – BBC News (news.google.com)
- Iceland Rejects Deposit Repayments to British, Dutch – Wall Street Journal (news.google.com)