Iceland angry at IMF aid delay

Úr Financial Times

Iceland vented frustration on Friday over a delay to further international aid to the country, amid allegations that the British and Dutch governments were responsible for the hold-up.

Johanna Sigurdardóttir, prime minister, said it was “regrettable” the International Monetary Fund had postponed a review that must be completed before Iceland can receive more of the $2.1bn (€1.47, £1.26bn) rescue package agreed after its banking sector collapsed.

Government officials said they suspected the delay aimed to increase pressure on Iceland’s parliament to ratify a deal to reimburse British and Dutch savers who lost money in Icelandic accounts. Reykjavik reached an accord in June to borrow £2.3bn from the UK and €1.2bn from the Netherlands to repay the countries for compensation to more than 300,000 depositors in the Icesave savings account.

But Iceland’s parliament has so far refused to approve the deal, amid mounting public anger over the allegedly harsh terms of the loans.

One government official said there was an “assumption” that the British and Dutch governments had influenced the IMF to hold back additional funds until parliament votes. Britain denied those allegations on Friday, pointing out that refloating the Icelandic economy with IMF support was crucial to London’s aim of recouping its money.

“The UK government is fully supportive of the IMF process with Iceland,” said a UK Treasury spokesman. “Timings of IMF board meetings are a matter for the IMF management.”

The IMF refused to be drawn on why the latest review of Iceland’s loan programme had been postponed. In addition to the $2.1bn IMF loan, a further $2.5bn from its Nordic neighbours is also tied to IMF approval.

Iceland stressed that it had ample foreign currency reserves to cope with a “short-term” delay. But Ms Sigurdardóttir made clear her disappointment that recent efforts to rebuild the economy had gone unrewarded by the IMF.

“Major progress has been made in refinancing the banking system,” she said. “As Iceland has fulfilled all the conditions set for the programme review, it is regrettable that its approval by the executive board will now be postponed.”

The view in London is that Iceland has a tendency to imagine a British or Dutch conspiracy behind any bad news, a reflection of grim relations between Britain and Reykjavik

Anti-British sentiment has been running high since the UK used anti-terror laws to freeze Icelandic assets last October. That anger reignited once the full cost of the Icesave compensation deal became clear.

Many Icelanders question why they should foot the bill for foreign savings lost in a private bank and feel resentful of the pressure being applied by London and Amsterdam. The Dutch foreign minister recently made clear that support for Iceland’s bid to join the European Union was conditional on the Icesave deal.

“The British and Dutch governments are misusing their powers in these international institutions,” said Ragnar Hall, a prominent Icelandic lawyer who opposes the agreement (Financial Times)