ICELAND REACHES AGREEMENT ON ICESAVE, OPENING DOOR FOR IMF

UNCLAS REYKJAVIK 000270 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EFIN PGOV IC SUBJECT: ICELAND REACHES AGREEMENT ON ICESAVE, OPENING DOOR FOR IMF DEAL TO BE APPROVED ¶1. (SBU) The governments of Iceland, the United Kingdom and the Netherlands came to an agreement November 16 on the compensation for deposits held in Icesave accounts, the online savings accounts offered by now-nationalized Landsbanki. The Icelandic government will pay the first EUR 20,000 (25,300 USD) for each Icesave account, per the EU directive on deposit guarantees, but will not be responsible for savings above that amount. The schedule of payments and other details are still to be negotiated. The European Union will extend a loan to Iceland for the purpose of paying off this Icesave debt. The statement from the Icelandic Ministry for Foreign Affairs said the talks were initiated by the French EU Presidency and "led to a common understanding that will form the basis for further negotiations." The statement also said the EU "will continue to participate in finding arrangements that will allow Iceland to restore its financial system and economy," and will support Iceland in the IMF. ¶2. (SBU) The Icesave dispute reportedly held up the additional 4 billion USD in loans Iceland needed for the IMF package and the 2.1 billion USD IMF loan. Prime Minister Geir Haarde said that Iceland had been told in no uncertain terms "that nobody will take part in lending" to Iceland until the Icesave dispute was resolved. Minister for Foreign Affairs Ingibjorg Solrun Gisladottir echoed that the government had received clear messages not only from the UK and Holland, but also from the EU member states and the Nordics. IMF Managing Director Dominique Strauss-Kahn said the IMF Executive Board would review Iceland's application on November 19. VAN VOORST