UK in econmic war with bankrupt Iceland

Daily Mail:

Gordon Brown declared diplomatic war on Iceland last night.

He launched a furious attack on the 'illegal' refusal to pay back billions owed to British investors in the country's failed banks.

The Prime Minister invoked rarely-used anti-terrorism powers to freeze Icelandic assets here as fears grew that vast sums of British cash could be lost.

Private savers, companies, town halls, police authorities and charities have seen up to £20billion frozen after Iceland nationalised its three top banks.

Most private savers should be compensated under UK government guarantees.

But these do not apply to public sector bodies and charities, and it emerged yesterday that more than 100 councils had invested up to £1billion of taxpayers' money in Icelandic banks, lured by high interest rates.

Financial experts said that if the cash is lost for good, council taxes could rise every year for the next 25 years.

The crisis has also hit dozens of charities, which had investments of £230million.

Whitehall sources fear Iceland is now effectively a bankrupt state. It owes the world an astonishing £35billion – £116,000 for every man, woman and child.

Britain's relations with the North Atlantic island were rapidly deteriorating to the hostility of the 1970s 'cod wars' over fishing rights.

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It appears they made some bad investments. The UK needs to impose greater restrictions on the investment of public funds in order to avoid this type of situation. Freezing assets of a bankrupt is not likely to squeeze compliance.