Icelandic officials say Britain has made their dire financial situation even worse by using antiterrorism laws to freeze British assets in its banks.

Already facing an economic meltdown with faltering banks and a greatly devalued currency, Icelandic officials say Prime Minister Gordon Brown's move to lump the country in with terrorist states -- freezing British assets of one failed bank and seizing the assets of another -- have set the country back years, The New York Times reported Sunday.

Icelandic Prime Minister Geir Haarde accused Britain of "bullying a small neighbor" and said the action was "very out of proportion."

Foreign Minister Ingibjorg Solrun Gisladottir said the move has made it nearly impossible to get foreign currency into or out of the country, with many banks refusing to even transfer money there and importers facing difficulties in paying their foreign bills.

"I must admit that I was absolutely appalled," she told The Times of Britain's decisions. "This is a major crisis. We haven't been in this situation for, probably, ever. We cannot solve it alone. We need solidarity from partners, from friendly countries, and we thought the U.K. was one of them."