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Iceland set to ease capital controls

Iceland has announced plans to start unwinding capital controls it had been forced to put in place after the banking system collapsed seven years ago. But moving money abroad will remain anything but easy.

The government in Reykjavik said Monday capital controls - imposed after the collapse of the island's banking system in 2008 - would be eased.

It added that legislation would be introduced shortly to unfreeze 1,200 billion Icelandic crowns ($9 billion, 8 billion euros) in assets that had been under restriction for seven years.

The government emphasized that the measure would mean that assets recovered from failed banks would be able to leave the country, but would be subjected to a 39-percent levy Reykjavik chose to call a "stability tax."

Unhappy creditors

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Iceland digs its way out of the crisis

Monday's announcement followed a late-night debate in parliament on how best to close down loopholes regarding transactions that could be made with money from bust lenders.

"We're taking unprecedented measures to address unprecedented circumstances," Prime Minister Sigmundur Gunnlaugsson said in a statement.

The government said investors in Icelandic assets could also get their money out of the country by selling crowns to the central bank. But because the latter controls the exchange rate, investors might get a less favorable price for their crowns than in the currency markets.

There's a chance that creditors with billions of dollars worth of assets frozen in the bankrupt lenders may launch legal proceedings against Iceland, with court action bound to take years during which Iceland would

remain locked out of international markets

.

hg/sri (dpa, Reuters)

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