Row looms as Iceland snubs payback
The British government is on a major collision course with Iceland after the country looked to have soundly rejected a plan to pay the UK back £2.3 billion worth of savings.
With nearly half of votes counted, 93% of Icelanders have said No in a referendum over whether to pay billions of pounds back to the UK and Holland following the collapse of savings bank Icesave.
The UK government, which was forced to guarantee tens of thousands of UK savers' deposits after the collapse in 2008, was waiting for the official result before commenting.
But ministers are understood to have been expecting voters not back a plan outlining the payment of £2.3 billion to Britain and £1.2 billion to the Netherlands in compensation.
Around 340,000 people in the two countries had accounts with Icesave, an Icelandic internet bank that offered high interest rates before it failed along with its parent, Landsbanki.
As the referendum results became known, Iceland's prime minister said her government would remain in office and continue to seek a repayment deal.
"This result is no surprise," Johanna Sigurdardottir said. "Now we need to get on with the task in front of us, namely to finish the negotiations with the Dutch and the British."
The vote followed the breakdown of talks between Iceland, Britain and the Netherlands at the end of last week.
Many Icelanders have objected to the tough terms of the deal imposed by the debtor countries, rather than the idea of payment itself. It would apparently require each person to pay around £90 a month for eight years - the equivalent of a quarter of an average four-member family's salary.
The British government is understood to have offered the Icelandic authorities a "best offer" for repayment, including an interest rate equal to that for a loan from the Nordic countries that the Icelandic government accepted in July 2009. Also on the table was relief on the first two years of interest for the loan, amounting to some 450 million euros (£400m).
