Brown threatens Iceland with legal action over savings accounts

10 October 2008 / by Rachael Stiles
Gordon Brown has threatened the Icelandic Government with legal action after it has spoken of its inability to honour a compensation guarantee for its UK savers, which have millions of pounds saved in its now collapsed banking system.

A total of £20billion of UK money is tied up in Iceland's ruined banks, and the Prime Minister has called the Icelandic Government's behaviour "totally unacceptable and illegal"; he has said that he is viewing Iceland's actions as a violation of the Anti-Terrorism Crime Security Act 2001.

Having received no assurances from the Icelandic Government, the Prime Minster said will be taking the aggressive action of freezing Landsbanki's £7billion of assets held in the UK, because the "responsibility for this lies fairly and squarely with the Icelandic authorities, and they cannot simply default."

More than 300,000 UK savers stood to lose their money as the credit crisis took its toll on Iceland's financial system, until the UK Government stepped in and guaranteed 100 per cent of their deposits. But the same protection has not been offered to the local councils, charities and other UK organisations which have more than £1billion locked in Icelandic savings accounts.

While the Government has not extended the same guarantee to organisations, is willing to go up against the Icelandic Government to demand that they be repaid, and also to recoup the losses incurred by guaranteeing Icesave's personal depositors. Mr Brown told the BBC that "We will take further action against the Icelandic authorities wherever that is necessary to recover the money."

In what is quickly developing into a diplomatic crisis, Iceland has reacted with surprise to Britain's aggressive actions, with Iceland's prime minister deeming them "completely unfriendly" and "not very pleasant".

A team of Treasury officials could travel to Iceland as soon as today to discuss a possible agreement, The Telegraph reported.

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