Iceland is to repay the Netherlands and Britain the full amount that they advanced to their citizens who lost money in the failure of the Icelandic bank Icesave.
The repayments will begin in July 2016.
The deal must be approved by the parliament, the president and the government of Iceland.
The agreement, worked out in talks in London yesterday among the three countries, calls for the Netherlands to receive a total of €1.3bn with an interest rate of 3%.
The finance minister did not specify the amount to be paid to Britain but said the interest rate would be 3.3%.
In London, a treasury spokeswoman said that Britain ‘welcomes this new proposal from Iceland on Icesave and looks forward to successfully resolving the issue by signing a new loan agreement with Iceland.’
'Mutually satisfactory closure of this issue will mark a new chapter in UK-Iceland relations,’ it added.
Britain and the Netherlands held intense discussions with Iceland ahead of a 6 March Icelandic referendum on a deal under which Iceland would repay the two countries €3.9bn to compensate for money they paid to 340,000 of their citizens hit by the collapse of the online Icesave bank in October 2008.
However, after more than 93% of Icelandic voters rejected the deal to repay the money by 2024, at what was widely considered a high interest rate of 5.5%, the talks stalled.
The dispute is considered a major sticking point as Iceland begins negotiations to join the European Union.
