No IMF Loan until Iceland-Britain Dispute is Solved?

Some European Union member states are said to be of the opinion that Iceland should not be granted a loan from the International Monetary Fund (IMF) until an agreement with Britain in regards to the deposits of Icelandic banks has been reached.

These same EU member states allegedly also believe that Iceland should not be granted a loan from the union’s emergency fund until the dispute surrounding the deposit accounts has been solved, Fréttabladid reports.

Icelandic Committee Members of Parliament of the European Free Trade Association (EFTA) Countries (CMP) said they had been given a clear message in that regard from EU officials during a meeting in Brussels earlier this week.

“I believe that extortion is involved,” said MP for the Left-Greens Árni Thór Sigurdsson, who is on the CMP. “[EU officials] said that a loan from the IMF would not happen unless we reached an agreement with Britain. They have influence in the fund and can set terms like that, which is known as extortion.”

Katrín Júlíusdóttir, an MP for the Social Democrats and chairman for the Icelandic division of the CMP, said Iceland’s representatives on the CMP had pointed out that Iceland intended to respect laws and regulations but that they disagreed with Britain on the interpretation of some legal issues.

Júlíusdóttir said Iceland’s representatives in the committee had also pointed out that there should not be a connection between international financial aid and a dispute on insurance for deposits.

British authorities have offered a loan to the Icelandic state so that Icelandic authorities can honor their obligations to Landsbanki account holders in the UK. However, a prerequisite for such a loan is an agreement with the IMF.

According to Fréttabladid, British Chancellor of the Exchequer Alistair Darling emphasized that a loan to Iceland would not be granted otherwise in an interview with the Dow Jones news agency on Monday.

Icelandic banks Landsbanki and Kaupthing, both of which have now been nationalized, accepted deposits through their subsidiaries in some European countries, primarily in the UK and the Netherlands. Landsbanki’s Icesave is an example of such a subsidiary.

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