Britain Listed Iceland as Terrorist Entity to Freeze Assets Leading to Economic Collapse

An Iceland Mired in Debt Blames Britain for Woes

The troubles between [Iceland and Britain] began three weeks ago when Britain took the extraordinary step of using its 2001 antiterrorism laws to freeze the British assets of a failing Icelandic bank. That appeared to brand Iceland a terrorist state.

“I must admit that I was absolutely appalled,” the Icelandic foreign minister, Ingibjorg Solrun Gisladottir, said in an interview, describing her horror at opening the British treasury department’s home page at the time and finding Iceland on a list of terrorist entities with Al Qaeda, Sudan and North Korea, among others.

“The immediate effect was to trigger an almost complete freeze on any banking transactions between Iceland and abroad,” said Jon Danielsson, an economist at the London School of Economics. “When you’re labeled a terrorist, nobody does business with you.”

The Icelandic prime minister, Geir H. Haarde, accused Britain of “bullying a small neighbor” and said the action was “very out of proportion.”

Iceland’s key interest rate now stands at 18 percent. The currency, the krona, has declined 44 percent in the last year.

“Salaries are frozen, food prices are shooting up and they are laying off people left, right and center,” [Danielsson] said. “Companies are going bankrupt all over the place. It’s unimaginable how bad it is.”

Ms. Gisladottir said Britain’s decision had sent Iceland back some 30 or 40 years, to a time when it was an isolated, poor country, dependent mostly on its fishing trade.

“This is a major crisis,” she said. “We haven’t been in this situation for, probably, ever. We cannot solve it alone. We need solidarity from partners, from friendly countries, and we thought the U.K. was one of them.”

November 1, 2008

http://www.nytimes.com/2008/11/02/world/europe/02iceland.html?hp=&pagewanted=all