Haarde threatens UK with legal action

Published on Saturday 11 October 2008 20:18

THE Icelandic Prime Minister yesterday said he would look at taking legal action against the UK as relations between the two countries continued to deteriorate over the fate of billions of pounds of British savings.

Geir Haarde issued the threat as talks in Reykjavik between a UK Government delegation and Icelandic officials continued last night in an attempt to persuade Iceland to guarantee deposits in the country's failed banks.

Haarde went on the attack in response to the view expressed by the UK Government that it considers the Icelandic authorities' behaviour unacceptable and is ready to take legal action to recover British funds.

Haarde described criticism from Gordon Brown as "disconcerting… and not very helpful".

Throwing a counterpunch, he was quoted yesterday as saying: "The British actions, coupled with comments made by the British PM, who I have actually had good relations with, can easily be interpreted as an attack on the interests of the Icelandic nation."

British investors are thought to have deposited 8bn in Icelandic banks, of which 1bn was invested by councils and charities. Scottish councils have invested 45m and Strathclyde Fire & Rescue Board has deposited 3m.

The Scottish councils' financial struggle has been exacerbated by suggestions that the SNP's flagship three-year council tax freeze is under threat, with local authorities claiming they do not have enough money to implement it.

Ministers gave Scottish councils an extra 70m last year to freeze council tax rates. They also agreed a three-year funding package designed to keep rates frozen for the next two years.

However, it emerged yesterday that councils want an extra 70m for next year and also to renegotiate the funding settlement to secure that extra money. They have warned the council tax freeze will not go ahead next year without the extra money.

Jim Murphy, the Scottish Secretary, has invited John Swinney to a meeting in Edinburgh to discuss the situation.