Iceland’s three main banks folded in late 2008, sparking a national crisis Icelanders are set to vote in a referendum on the latest plan to repay the UK and Netherlands debts incurred when its banking system collapsed.
The country overwhelmingly rejected a previous repayment plan, which was put to a referendum last March.
The new deal offers less onerous repayment terms, but opinion polls suggest it will again be rejected.
Iceland’s Landsbanki bank collapsed in 2008, and British and Dutch investors lost some 4bn euros (£3.5bn; $5.8bn).
The bank had offered savings accounts in the UK and Netherlands under the name Icesave.
The British and Dutch governments had to reimburse 400,000 citizens who lost savings – and Iceland must now decide how to repay that debt.
Under the terms of the latest deal, Iceland would pay the money back with 3.3% interest between 2016 and 2046.
Under the previous proposals, the money was to be paid back with 5.5% interest between 2016 and 2024.
The actual cost to the state is expected to be much less than the 4bn euros owed, as the government says most of the repayment will come from selling the assets of Landsbanki.
The government has said it does not expect the cost to exceed 50bn crowns (£168m).
Analysts say the issue is vital to Iceland’s prospects for recovery because it would allow the country to return to the financial markets to fund itself.
Solving the dispute is also seen as key to Iceland’s chances of joining the EU.
Iceland’s three main banks collapsed within days of each other in October 2008.
The government compensated Icelandic savers, but overseas customers faced losing all of their money.
The issue sparked a diplomatic row between Iceland and the UK, and created uncertainty over Iceland’s economic recovery.
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