Icesave dispute will poison trade links, says MEP

AN INFLUENTIAL member of the European Parliament will today call on the Nordic countries to intervene in the bitter dispute between Britain and Iceland over collapsed online bank Icesave.

Alyn Smith, an SNP Member of the European Parliament and member of Europe's Iceland delegation, is urging the Nordic Council, the diplomatic body representing Denmark, Finland, Norway and Sweden, to act as a broker between the two nations before the row "poisons" important trade links.

Relations soured between London and Reykjavik last week when Iceland's president Olafur Grimsson shocked the international community by refusing to rubber stamp a bill to repay a 3.6 billion loan to Britain and the Netherlands. It was only the second time in 60 years that an Icelandic president has staged such a revolt.

The so-called "Icesave bill" was drawn up to reimburse the UK and Netherlands after governments stepped into compensate British and Dutch savers whose accounts were frozen when Icesave collapsed in October 2008.

Grimsson's decision to put the unpopular bill to a referendum sparked a war of words between London and Reykjavik with financial services minister Lord Myners last week warning that Britain would seek to block Iceland's entry into the European Union if it reneged on the loan.

Although efforts have since been made by both sides to soothe tempers, Smith says the diplomatic spat, which has been compared to the "cod wars" of the Seventies, risks causing irrevocable damage to trade relations, which are vital to both the UK and Scottish economies.

He is urging the Nordic Council to act as a mediator between Britain and Iceland so that an amicable agreement can be reached over the loan. He has written to both Halldr sgrmsson, secretary general of the Nordic Council of Ministers, and UK foreign minister David Miliband pressing them to hold talks with Iceland.

Smith said: "This is a complicated and sensitive dispute but with a bit of goodwill it is capable of resolution.

"I want to see an impartial honest broker step in before it is too late."

According to UK Trade & Investment, British exports to Iceland are worth more than 180m a year. British companies collectively enjoy a 4.4 per cent share of Iceland's total import market, rendering the UK Iceland's ninth biggest import partner.