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Iceland is to repay the British government what they paid out to depositors. The Icelandic government had never until now accepted/agreed any liability, any more than the British government would guarantee the debts of a defunct British company. Iceland has now lost, not the British tax payer who is being 'reimbursed'. Britain did not give any money to Iceland, there was until now no deal and Iceland did not welsh. It has been said that, when an Icelandic central bank governor said the nation would not accept responsibility, Britain decided to seized Icelandic assets. Strong arm tactics were used to hold a weak party to ransom in order to get the money for depositors who when they deposited it knew their money was not guaranteed. Iceland was for several weeks on the same list as AlQaeda, etc. and, yes, the law is an anti-terror law designed specifically to avoid legal niceties (checks and balances) against particularly hated elements. That there was a pecuniary motive does not change its nature.
The question is, why not use the same tactics against other allies ? We probably know why - too daunting a prospect, not such an easy, soft target.
Agreed, part of the motive and hullabaloo is likely to have been a convenient smokescreen to divert attention from the incompetence coming to light in Britain itself.