UK government willing to be flexible on Icelandic debt

After the result of the Icelandic referendum on the debt repayment scheme for the UK government and the Netherlands government was announced, delivering a resounding "no" vote, the UK authorities have stepped forward with a proposed compromise. After £3.4 billion was loaned to the Icelandic authorities in order to repay savers who lost their savings in the financial meltdown a political argument broke out between the UK government and the Icelandic authorities.

It seems as though people power in Iceland forced the authorities to rethink the proposed debt repayment plan and indeed Alistair Darling has tonight admitted it could take "many, many years" before the country was in a position to repay all of its debt. This is a very different tack to the one taken by the UK government just a few weeks ago when a proposed £3.4 billion debt repayment plan had been agreed by the Icelandic parliament only to be rejected by the Icelandic president who then called a referendum.

It is believed that the Icelandic authorities will put more pressure on Gordon Brown to reduce the size of the payback and indeed we could see the terms and conditions originally agreed by the parliament significantly extended.