A Treasury spokesman said the government did not consider Iceland or its banks as terror regimes.
He told BBC News: "The government froze the assets of Landsbanki in the UK as a precautionary measure to ensure UK creditors are treated fairly.
"The order was made under a power contained in the Anti-Terrorism, Crime and Security Act 2001, however it was not taken on the basis of the anti-terrorism provisions in the Act.
"The Act includes a broad range of provisions and is not only about countering terrorism."
He rejected the assertion that Iceland's economic problems had been worsened by the UK government's actions.
He added: "We have to be clear that the difficulties began in Iceland and were the result of failures of Icelandic banks and our actions followed that.
The British government has promised to reimburse all Icesave customers’ savings in full regardless of if the Icelandic government reneges on its responsibility to insure the first EUR 20,000. The damage that would do to Iceland’s international reputation could be considerable however, and the [Icelandic] PM has reiterated his desire not to go down that route.
But "take comfort", if you will, in knowing the people hardest hit are the average Icelandic "fuckers" now dealing with skyrocketing inflation; not British investors.
posted by Marisa Stole the Precious Thing
With the pound sterling dropping like a stone against most other currencies and credit default swap rates on long-term UK sovereign debt beginning to edge up, this is a good time to revisit a suggestion I made earlier on a number of occasions (e.g. here, here and here), that there is a non-trivial risk of the UK becoming the next Iceland.
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