Iceland walks out of talks

TALKS with Iceland over the repayment of £2.3 billion in debts to the UK broke down last night after its representatives walked out of talks in London.

It means Iceland will next week hold a referendum that is expected to reject a deal for the repayment of cash owed to Britain and the Netherlands as a result of the collapse of Landsbanki, which was behind the Icesave internet savings account. The UK and Dutch governments said they were "disappointed" no deal had been reached after 18 months of talks.

Sources close to the talks said Iceland had been offered an advantageous new floating interest rate on the debt. Also on the table was the offer of a two-year interest holiday worth about 400 million.

A Treasury spokesman said: "The UK and Dutch governments are disappointed that, despite their best efforts over the past year and a half, the Icelandic government is still unable to accept our best offer on the Icesave loan."

Iceland's finance minister Steingrimur Sigfusson said his negotiating team was returning to Reykjavik after encountering "significant differences".