Iceland thaws over clash with UK

Posted 24/11/2008 - 12:44 by dawes

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Secret talks between the UK and Iceland governments may strengthen London’s case in the dispute over its use of anti-terror legislation to freeze Icelandic assets, according to the chairman of the board of governors of the central bank in Reykjavik.

“Not all conversations concerning this matter have been made public . . . When the matter is investigated, other conversations will have to be made public. I am aware of what they are about and I am aware of what in fact determined the position of the UK authorities,” said David Oddsson, former prime minister and one of Iceland’s most influential power brokers.

It is the first time a leading member of the island’s close-knit financial community has indicated Iceland may be to blame for the UK’s controversial move. Mr Oddsson is closely affiliated to Geir Haarde, the prime minister, who was previously his finance minister. Together they oversaw the implementation of free market reform in Iceland.

The comments by Mr Oddsson came in an extraordinary speech he gave, in a personal capacity, to the Icelandic chamber of commerce. If the conversations to which he referred were made public and if his description of the contents was accurate – it is not known who took part in the talks – it could undermine planned legal action by Reykjavik against the UK government over its use of anti-terror legislation.

Relations between the two deteriorated seriously after the UK used the legislation to freeze Icelandic assets in the UK to try to protect UK savers in Iceland’s banks.

Reykjavik claims this may have been illegal and has hired Lovells, a law firm, to investigate. The Icelandic government and central bank declined to comment.

Mr Oddsson has been blamed by many countrymen for the collapse of banks in Iceland and demonstrators have demanded his resignation. Thousands protested in Reykjavik on Saturday, calling for Mr Oddsson and Mr Haarde to resign, the latest in a series of protests in the capital since the financial meltdown.

But Mr Oddsson claims he warned the authorities repeatedly that the banks were in trouble 18 months before the crisis, but was ignored. In the chamber of commerce speech he warned the government’s pledge to investigate the banks’ collapse was a whitewash

“The investigation . . . is in all respects unsuitable and insufficient. It is almost laughable to see the posturing in the entire organised propaganda campaign which has been carried out by those who bear the prime responsibility,” he said.