Going to be a cold winter in Iceland. I have room for, and can take in, two to six Icelandic babes if anyone sees such a need. Just PM me.

Brown Threatens to Freeze Icelandic Assets in U.K.

Oct. 9 (Bloomberg) -- Prime Minister Gordon Brown said the U.K. may freeze the assets of Icelandic companies, escalating a dispute over who should compensate British savers with deposits caught up in the collapse of the island's banking system.

``We're freezing the assets of Icelandic companies in the U.K. where we can,'' Brown told BBC radio today in Birmingham, England. ``We will take further action against the Icelandic authorities wherever this is necessary.''

The U.K. and Iceland are tussling over who should compensate British savers with money locked in accounts at Kaupthing Bank hf and of Landsbanki Islands hf after the country's banking system collapsed.

Brown says Iceland is failing to honor its guarantee to cover overseas savers on accounts that it usually backs up to 20,887 euros ($28,400), leaving Britain to pick up the tab. Iceland's prime minister Geir Haarde said the U.K. government is to blame for triggering the crisis when it used anti-terrorism laws to seize the assets of Icelandic banks in the U.K.

``What happened to Kaupthing happened because of the actions taken by the U.K. authorities,'' Haarde told journalists in Reykjavik today after speaking by telephone to U.K. Chancellor of the Exchequer Alistair Darling. ``We were hoping Kaupthing would survive the crisis.''

Blame for Crisis

Brown, trailing in polls at home, is attempting to shift the blame for a surge in borrowing costs to authorities overseas, pointing out that the trouble started in the U.S.

He's also concerned that at least 300,000 British voters along with dozens of local authorities had accounts in Iceland that they now can't tap, and that the U.K. Treasury will have to compensate them.

The Icelandic banks are unable to finance about $61 billion of debt, 12 times the size of the economy, according to data compiled by Bloomberg. The government in Reykjavik is seeking a loan from Russia and may ask for aid from the International Monetary Fund to help guarantee deposits.

``This looks like a total collapse,'' said Thomas Haugaard Jensen, an economist at Svenska Handelsbanken AB in Copenhagen. ``It'll take several years before the economy can start to return to growth.''

Yesterday, the British Treasury transferred to ING Groep NV of the Netherlands the deposit business of two other banks including Kaupthing Singer & Friedlander, a unit of Iceland's Kaupthing Bank Hf, and Heritable, a U.K.-based banking subsidiary of Landsbanki. The Treasury today confirmed it used the 2001 Anti-terrorism, Crime and Security Act.

`Economic Interests'

``To protect U.K. economic interests, the government has frozen the funds and financial assets held by Landbanksi,'' Stephen Timms, financial secretary to the Treasury, said in Parliament in London.

Brown said today Haarde's position was ``effectively illegal'' and ``completely unacceptable.'' In a later interview with Sky News, he said Icelandic authorities had to ``take responsibility'' and again said he was ``prepared to consider all forms of actions'' including freezing assets.

Icelandic companies employ 100,000 people in the U.K., Haarde said.

Yesterday's decision by the British government to extend 50 billion pounds in capital to at least eight institutions suffering from the credit squeeze overshadowed the action against Icelandic banks.

Iceland's Growth

Assets at Iceland's three biggest banks, Glitnir Bank hf, Landsbanki Island hf and Kaupthing, had grown five-fold since 2004 as the companies looked to expand beyond the confines of an island with a population of 320,000, half that of the city of Las Vegas. Much of that expansion was debt financed.

The cost of borrowing in dollars for three months in London soared to the highest level this year today as coordinated interest-rate reductions worldwide failed to revive lending among banks for any longer than a day, partly on concern over who holds Icelandic debt.

U.K. taxpayers will probably face a bill of at least 2.4 billion pounds to compensate about 300,000 U.K. holders of accounts at Icesave, a unit of Landsbanki, the Financial Times reported, citing unidentified British officials.

``The economy may well contract more than 10 percent between now and the end of this crisis,'' said Lars Christensen, chief analyst at Danske Bank A/S in Copenhagen. ``Inflation will jump to at least 50 percent to 75 percent in the coming months.''

British Guarantee

Darling has guaranteed that individual savers will not lose money from the collapse of Landsbanki, though corporate and government accounts may not be covered. That pledge has not yet been extended to more than 45 local councils with Icelandic accounts.

So far, U.K. local authority investments with Iceland's banks total more than 743 million pounds, according to data collected by Bloomberg and by the BBC.

Their parent organization, the Local Government Association, met with government ministers today to press a claim for state-backed assistance. Afterwards both sides issued a joint statement, in which the government said it would offer assistance to councils where appropriate ``on a case by case basis.''

London's municipal authorities alone had more than 212 million pounds invested in Iceland, said London Councils, the body that represents the U.K. capital's 33 local authorities.

That included 40 million pounds invested by Transport for London, which provides bus and underground services for the U.K. capital, it said. The money was invested in an Icelandic subsidiary of Singer and Friedlander Group Plc, a unit of Kaupthing Bank Hf, London Mayor Boris Johnson told the BBC.