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File photo Press Association

Iceland goes to the polls over whether or not to pay back loans

Voters are deciding on whether or not to approve a deal to repay Britain and the Netherlands money owed from the collapse of an online bank in 2008.

ICELANDERS ARE VOTING today on whether to approve a deal to repay Britain and the Netherlands €4 billion for their citizens’ deposits in the failed online bank Icesave, with the result too close to call.

Polls put the “no” side slightly ahead as polls opened in the referendum.

Icelanders overwhelmingly rejected a previous deal in a referendum last year.

The government hopes a “yes” vote on an improved offer passed by parliament will finally resolve a dispute that has caused friction among the three countries and complicated Iceland’s recovery from economic collapse.

The messy dispute stems from the collapse of Iceland’s banks — and the tiny island nation’s overheated economy — in 2008.

British and Dutch savers had deposited more than €4 billion in Icesave’s high-interest accounts. After Icesave collapsed, British and Dutch authorities borrowed money to compensate their citizens, then turned to Iceland for repayment.

The dispute has grown acrimonious, with Britain and The Netherlands threatening to block Iceland’s bid to join the European Union unless it is resolved.

The plan would see Iceland start repayments on the debt’s interest in 2016 and finish by 2046, at an interest rate of 3 percent to The Netherlands and 3.3 percent to Britain.

The recovered assets of Icesave’s parent bank, Landsbanki, are expected to cover the majority of the debt.

The deal was reached in December after long negotiations and approved by Iceland’s parliament in January but vetoed by President Olafur Ragnar Grisson amid strong public opposition.

Many Icelanders feel they should not have to pay for the mistakes of their banking elite, who made deals around the world during a decade of boom before the credit crunch struck.

The results of the vote are expected early Sunday

- AP