Iceland says it is not bound by the agreements it made with the Netherlands and the UK over repayment of the lost deposits of the failed Icesave bank. Icelandic Prime Minister Johanna Sigurddottir wrote in a letter to UK Prime Minister Gordon Brown that her country signed the accords to make up for the lost savings without "an unequivocal legal obligation to do so".

Ms Sigurdottir was responding to a letter from Mr Brown reminding Iceland of its commitment to ensure that the deal was legally binding. In addition to this gentle prod from London, pressure on Iceland is also raised from Germany, where a banking group has announced it is taking Iceland to court. Dutch Finance Minister Wouter Bos has not yet commented on the latest development.

The Netherlands and the United Kingdom struck a tentative deal over the refunds with Iceland in June, including 1.3 billion euros for Dutch people who lost their savings after the collapse of Iceland's Landsbanki, which was running the Icesave online bank. At the time, parliament in Reykjavik made the deal conditional on economic growth and wanted the repayments to end by 2024. These conditions were rejected by The Hague and London, which led to the current renegotiated settlement.

Not a done deal
Iceland's 63-member parliament still has to agree to the revised deal. The Icelandic opposition has raised objections. A vote is expected in the next few weeks.

Prime Minister Sigurdottir wrote that she counts on the Netherlands and the UK to deal with the Landsbanki case in all honesty and confidence. Iceland borrowed 1.8 billion euros from the Netherlands and 4 billion dollars from the UK to cover the amount due to depositors. The International Monetary Fund and the Scandinavian countries also helped with a 4.6 billion dollar bailout. In all, Iceland owes 8.2 billion dollars to foreign depositors, Finance Minister Steingrimu Sigusson said on Tuesday.

German pressure
Iceland is beginning to feel the pressure from other countries too. German DekaBank announced on Wednesday it will sue the government in Reykjavik on behalf of German creditors. The German firm is challenging an Icelandic law which gives Icelandic savers more protection against bank collapses than foreign depositors. Icelanders get their money back first. Iceland University's Law Professor Stefan Mar Stefansson told Reuters that having to drop this principle is "a scary thought." It would make the country's liabilities far larger that just those of the Icesave debacle, he said.