Iceland economy and Icesave update

2006_1019image0014In a press conference this afternoon in Reykjavik, Prime Minister Geir H. Haarde and Foreign Minister Ingibjorg Solrun Gisladottir said that the issue of compensation for Icesave customers in the Netherlands and the UK is still on course to be resolved soon, with final documents already being prepared.

Meanwhile, former Landsbanki chief Bjorgolfur Gudmundsson said that even at 50 percent of their original value, Landsbanki’s assets alone will be more than enough to fund the refund of the first EUR 20,000 of each account, in his opinion.

PM Haarde said that in light of recent developments, he believes the IMF will be able to vote on its decision to extend a USD 2.1 billion loan to Iceland early next week.

On the home front, the government sought to win public support and protect vulnerable taxpayers by introducing measures aimed at lightening the load on mortgages and ensuring that people will not be evicted from their homes. Child benefits will be changed to monthly payments instead of quarterly. Further details are expected in tomorrow’s newspapers.

The British RAF will not take control of the protection of Icelandic airspace in December, as was originally planned. The Prime Minister said that it was a NATO decision not specifically sought by Iceland or Britain; but that both nations agree with it. He said Iceland’s long term defence strategy has not changed.

Earlier in the day, the traditionally Euro sceptic Independence Party announced it will begin investigating whether the party can support EU membership in January. The other government coalition party, the Social Democrats, is pro-EU membership, as is around three quarters of the Icelandic population.

The international credit ratings agency Fitch this evening welcomed the news, but declined to state when or if it will increase Iceland’s sovereign credit rating.

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