As we have seen in the news, since the credit crisis and the collapse of Icelandic banks, that voters in Iceland have overwhelmingly rejected proposals to pay the UK and the Netherlands in the wake of the collapse of the Icesave bank – in fact with just one third of results counted, 93% of voters said “No” in a referendum!

As a result of the credit crisis and the collapse of the banking system, governments around the world pumped billions into the system to prevent complete melt-down. The British and Dutch governments paid compensation of £3.4 Billion (€3.8 Billion; $5.2 Billion) to customers directly affected as a result of the collapse of Icesave bank and are seeking reimbursement from Iceland for this.

It is right (perhaps?) that the Iceland Government have sought the views of Icelanders (perhaps our own government should have doe the same with us before doing the bail-outs they did!) before making any such reimbursement, but are they being short sighted?

Are the Icelandic people not seeing the bigger picture and will their economy become a wasteland where no world economy will risk investing again? The world economy is a small place these days and works as if it were one, which is more apparent today than it has ever been before.

With the advent of the Internet and with world economies being highly inter-dependent it is vital for economies to recognise how they could quite easily become black listed for what could be deemed to be ‘Bad Trading’. For example, would you lend to someone a second time when they had reneged on a deal or failed to repay a loan the first time? It is important to recognise that the Iceland government is not contractually due to pay the £3.4 Billion, but perhaps morally it is and if it wants to be taken seriously in the financial world economy again then the Icelandic government needs to take responsibility for the actions of the bank that failed on their own shores.

It is important for Icelanders to recognise that the Iceland economy benefited hugely from the positive effects of the boom times, but appear to be unwilling to payout when times are tough. They are not willing to put their hands in the pockets that were lined from profits made as a result of people believing in their banks when things were good, to help out the governments of the countries that helped them line their pockets in the first place.

Significant progress has been made over frozen UK investments in failed Icelandic banks, say the Treasury and the Icelandic authorities.

Arrangements have been agreed “in principle” for a quick payout to depositors in Landsbanki’s closed internet bank Icesave, they said.

The talks continue as world leaders meet to tackle the financial crisis.

Meanwhile, Chancellor Alistair Darling said he would unveil more details about the UK’s bank rescue plan next week.

His comments came in a BBC interview in Washington where he has been meeting finance ministers from the group of seven industrialised nations and US President George W Bush.

Mr Darling would not say whether the details would be released before markets opened on Monday.

“Significant progress was made on retail depositors of Icesave with arrangements agreed in principle for an accelerated payout to depositors” Treasury and Icelandic officials

“What we’re doing over the weekend is looking at specifics, how do we implement it and we’ll be making an announcement at the beginning of the week,” he said.

Policy makers from around the world are meeting to co-ordinate efforts to battle the crisis engulfing the global financial system and threatening to plunge major economies into recession.

Prime Minister Gordon Brown is to fly to Paris on Sunday to hold crisis talks with French president Nicolas Sarkozy before joining in a scheduled meeting with other leaders from eurozone countries.

Tensions have flared between Britain and Iceland as the collapse of Iceland’s banks have put billions of pounds of UK savers’ money at risk.

Iceland guarantees

The chancellor has said all UK private accounts affected by the bank crisis will be protected.

A Treasury delegation is in the Icelandic capital to seek assurances UK savers with money in collapsed Icelandic banks will not lose their deposits.

The group wants to establish a claims procedure for British depositors to get their money back as soon as possible.

Private deposits with collapsed banks Kaupthing Singer and Friedlander (KSF) and Heritable have been sold to ING Direct, where the accounts should continue to operate normally.

Private customers with Icesave are protected by the UK’s Financial Services Compensation Scheme, with Mr Darling promising compensation above the usual £50,000 limit to cover all deposits.

The first £16,000 of a deposit is meant to be guaranteed by the Icelandic authorities.

It is understood Iceland has now agreed in principle to honour this commitment.

British investors have roughly £4bn in the Icelandic bank.

“Significant progress was made on retail depositors of Icesave with arrangements agreed in principle for an accelerated payout to depositors,” said the statement issued by Treasury and Icelandic officials on Saturday.

‘Friendly atmosphere’

The UK government is also pressing for the quick return of almost £1bn of funds invested by councils and other public bodies, including charities, which the government has not offered to protect.

It is thought this will also be discussed over the weekend.

The Treasury delegation in Reykjavik includes officials from the Bank of England and the Financial Services Authority.

After a number of sharp exchanges between Gordon Brown and his Icelandic counterpart Geir Haarde, the countries have sought to show they are now working together.

“Delegations of Iceland and the United Kingdom have met in a friendly atmosphere in Reykjavík to discuss issues of mutual interest related to the current financial crisis,” the joint statement said.

News reported by The BBC