An Icelandic MP says Britain spied on Iceland while wrestling to rescue its citizens' cash from collapsed Icelandic banks after the financial crisis. Birgitta Jónsdóttir claims she received a tip-off from WikiLeaks founder Julian Assange.

Jónsdóttir, who represents Iceland's Pirate Party, maintains that the UK's intelligence agencies systematically intercepted messages sent by Icelandic negotiators when Britain tried to recover savers’ cash held in the country’s banks that went bankrupt. 

Jónsdóttir, a prominent WikiLeaks supporter, said that she was tipped off to the spying in 2010 by Assange, Iceland's Visir newspaper reported. 

Having received the tip-off, she warned members of Iceland’s negotiating team not to send emails to each other. 

"The UK authorities had very good access to everything that was going on between members of the team. It is the role of intelligence, for example MI5, to spy on other countries, especially if it concerns their national interests. Their duty was to gather information and intelligence about us, and the duty of the Icelandic government was to do everything to protect us against such espionage," Jónsdóttir told the newspaper. 

The revelation could reignite tensions between the UK and Iceland, which were stoked in 2008 when the UK government used anti-terrorism legislation to freeze an Icelandic bank’s assets in the UK. The British Chancellor of the Exchequer at the time, Alastair Darling, seized the funds of Landsbanki’s Internet bank, Icesave, to protect UK depositors’ money after the Icelandic government reacted to Landsbanki’s toxic debts by nationalizing the bank. 

Last week, Britain got involved in another major spy scandal when it was reported that the UK has been allegedly using its Berlin embassy to spy on the nearby Bundestag, as well as the office of Chancellor Angela Merkel. 

A new report also revealed that British intelligence agency GCHQ allegedly helped its counterparts in France, Germany, Spain and Sweden develop methods of mass surveillance of internet and phone traffic in the last five years. 

Documents supplied by former National Security Agency contractor Edward Snowden to the Guardian newspaper show the UK Government Communications Headquarters’ enormous influence throughout Europe. GCHQ is part of the ‘Five Eyes’ intelligence-sharing partnership between the US, Britain, Canada, Australia and New Zealand.  The documents detail how the agency developed and promoted spying processes, built relationships with telecommunication companies and evaded national laws that restrict the surveillance powers of intelligence agencies. 

Earlier reports revealed by Snowden showed that the US has been monitoring the communications of up to 35 world leaders, including Merkel and Brazilian President. Communications of hundreds of millions of people across the world were also monitored, the leaked documents revealed, including British, French, Spanish and American citizens. 

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