Iceland, EU Ease Impasse Over Bailout

Iceland agreed that European regulations require it to guarantee accounts of hundreds of thousands of Britons and other foreigners who are frozen in the online arm of one of the nation's collapsed banks, the government said Sunday. Recognition of the legal principle, which came in talks with European Union representatives, is a significant step toward freeing up a $2.1 billion bailout package from the International Monetary Fund, the Wall Street Journal reported today. The package has been in abeyance amid squabbles between Iceland and other nations over the reimbursement of foreign depositors. Not spelled out in the agreement, which Iceland described as "guidelines" for future negotiations, is how the cash-strapped country would actually pay the depositors. The U.K. is particularly incensed about depositors in Icesave, an Internet operation of the Icelandic bank Landsbanki Islands Hf. The government is expected to use assets from Landsbanki, now in government receivership, toward the guaranteed deposits at Icesave. Iceland's three big banks collapsed last month amid the credit crunch, pulling down the entire country's banking system. The government put them all into receivership, which froze the assets of many foreigners who had been attracted to the banks' high-interest-rate accounts. The IMF said the fund's board will vote on the loan Wednesday. Read more. (Subscription required.)