4 billion euro payback

The final agreement was controversial in Iceland, where many are reluctant to foot the bill for the losses of a private company.

Icesave, an online subsidiary of the Landsbanki bank, had attracted more than 320,000 British and Dutch investors, lured by its high interest rates. When the global credit crunch stalled the Icelandic banking industry last year, the savings accounts were frozen. London and the Hague later partially compensated their citizens for their losses, but then turned to Iceland's government for repayment.

Although an agreement was reached in June between Prime Minister Johanna Sigurdardottir and the British and Dutch governments, the deal still needed to final approval by the Althing, Iceland's parliament.

"This is one of the largest financial and economic issues ever faced by Iceland and it has greatly preoccupied the Althing and the people since the collapse of the banking system last autumn," Sigurdardottir said in a statement released after the vote. She added that the payments to the two countries represented the single largest financial commitment ever made by her country.

Public protests

For the tiny nation of just 320,000 people the payment of about four billion euroe ($5.7 billion) amounts to about 12,500 euros ($18,000) per citizen. Protests were held outside the parliament building amid fears that the move would prevent the financially beleaguered country from recovering for decades.

"It is ridiculous that the nation will have to take on the losses of private entities," said MP Margret Tryggvadottir of the Civil Movement, who voted against the deal.

The bill was only pushed through after amendments were passed linking the pace of repayment to the Iceland's economic growth, as well as promising not to use the country's natural resources as collateral. The final date of payment was also extended to 2024.

International implications

A failure to approve the repayment could have threatened Iceland's application to join the European Union, as well as its ability to receive aid from the International Monetary Fund. Both steps are thought to be critical to Iceland's post-economic meltdown recovery.

"This is important and it ensures that Iceland probably can continue counting on IMF support and that the EU membership will perhaps not pick up speed, but at least move forward," SEB analyst Carl Hammer told Reuters news agency.

Either way, it has been a bitter pill for the once prosperous nation to swallow, in the wake of a devastating economic collapse.

"Personally, I'm relieved that it's over," Finance Minister Steingrimur Sigfusson told Reuters. "I don't use the world 'glad' since there isn't really anything to be happy about in this very tragic case for Iceland."

hf/AFP/AP/Reuters
Editor:Rick Demarest