Reinfeldt: ‘Iceland must honour its commitments’

Reinfeldt: 'Iceland must honour its commitments'
Icelanders demonstrate in London, March 2009
Sweden's Prime Minister Fredrik Reinfeldt has reminded crisis-stricken Iceland that the Swedish portion of a large Nordic country loan is conditional on Reykjavik concluding a compensation deal for the Icesave bank collapse.

“For us it has been important, and I think it will be for all parties, that (Iceland) does in fact honour its international commitments,” Reinfeldt told the TT news agency on Monday.

Iceland’s Nordic neighbours Denmark, Sweden, Finland and Norway agreed last year to €1.8 billion euros ($2.5 billion) in loans to the North Atlantic island nation to help it emerge from its deep economic crisis.

The loans were meant to bolster a promised $2.1 billion (€1.5 billion) bailout from the International Monetary Fund (IMF).

So far, Iceland has pocketed about one fifth of the Nordic loans and half of the IMF money, but the remaining payments have been delayed as Reykjavik attempts to reach a compensation deal with Britain and the Netherlands over the collapse of the online Icesave bank in October 2008.

In a referendum on Saturday, more than 93 percent of Icelandic voters rejected a deal to repay Britain and the Netherlands €3.9 billion ($5.3 billion) to compensate for money they paid to 340,000 of their citizens hit by Icesave.

Iceland’s left-wing government has expressed its commitment to negotiate a new, more advantageous deal soon.

Reinfeldt said he understood Icelanders’ frustration at being burdened with paying for the failures of a private bank and said the financial crisis had exposed weaknesses in the global financial system.

“We cannot have a situation where financial actors put any profits into their pockets while poor growth and large debts are sent to the taxpayers. And that is of course what went wrong on Iceland.”

Reinfeldt insisted nonetheless that “Iceland (must) honour its international commitments.”

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