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Will the UK government be recompensed for Icelandic banking collapse compensation?

There are serious signs today that the Icelandic government may not yet be in a position to sign off a £3.4 billion payout in relation to the recent Icelandic banking collapse. Despite the fact that the compensation package has been voted through the Icelandic parliament there is growing resistance amongst Icelandic nationals who feel that they are being made to pay the price for political indifference and in effect a by-product of the credit crunch.

When you also throw into the mix the fact that Alistair Darling is blamed by many in Iceland for talking down the currency and bringing panic to the financial markets, there is potentially a basis for this growing reluctance to assist the UK and the Dutch governments. However, one major problem which the Icelandic authorities will have in the short to medium term is the fact that the International Monetary Fund is willing to offer finance but it is believed that the banking compensation program is part of this deal. The country's bid to join the EU will also be impacted if the banking compensation bill is rejected and the president refuses to sign it off.

All in all, there is still much work to be done by the Icelandic authorities and in the end they will have to pay compensation to overseas investors.

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