Shall I tell you the worst thing about this wretched business? Worse than the return of socialism, worse than the indenturing of our children? It's the way we've treated Iceland, until last week perhaps the most Anglophile country in Europe.

To seize the assets of a friendly state was bad enough; to use anti-terrorist legislation was unforgivable. When the Crime and Security Act was passed in 2001, we were repeatedly told that it would be used only in cases of imminent danger: “If you've nothing to hide, you've nothing to fear.”

Nothing to fear, eh? Since then it has been invoked to eject a heckler from the Labour conference, to detain a woman walking on a cycle path and to prevent recitation of the names of fallen servicemen at the Cenotaph. Now this.

Gordon Brown claims that the expropriation was necessary because Iceland planned to default on British Icesave accounts. How he got this impression is a mystery. Iceland's finance minister made clear in meetings with the British authorities that depositors would be paid. The Prime Minister, Geir Haarde, said in public: “We will immediately review the matter together to find a mutually satisfactory solution. We are determined to make sure that the current financial crisis does not overshadow the important and longstanding friendship that we have with the UK.”

Brown's response? To seize the UK assets, not of the bank that ran Icesave, but of a wholly unrelated bank, Kaupthing, thereby collapsing it. Icelanders, who had been expecting to negotiate a guarantee to British depositors - eventually agreed on Monday - were stunned. They couldn't bring themselves to believe that the leader of a country they admired would destroy their last solvent bank simply to give himself what Labour MPs have since called “his Falklands moment”. Except that Britain wasn't the aggressor in the Falklands. To pick on a country with half the population of Wiltshire was cowardice, not courage.

For courage, ponder this message on my blog from an Icelandic fisherman who had saved up to attend university in Denmark. Suddenly, his savings are gone, his currency worthless. “We have lost our money, we may lose our economic freedom, but we will not lose our honour. Iceland will meet its obligations to the British people, no matter what. I will quit school and abandon my dreams, go back to my boat and work till my fingers bleed to play my part in paying off our debt.” Read those words, Prime Minister, and hang your head in shame.

— Daniel Hannan is a Conservative MEP and blogs at www.hannan.co.uk

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