The war of words between Iceland and the UK escalated on Friday amid further claims and counterclaims over Reykjavik’s intent and ability to guarantee deposits of UK savers.

Geir Haarde, Iceland’s prime minister, squared up to Alistair Darling, the chancellor, saying a transcript of Mr Darling’s conversation with his counterpart in Reykjavik – published in the FT on Friday – showed “that the Icelandic government intended to fulfil its obligations”.