Iceland says it is talking to EU about loan

REYKJAVIK (Reuters) - European Union outsider Iceland is talking to the EU about a possible loan from the bloc's crisis fund, a spokeswoman for the island's prime minister said on Friday.

Iceland, an early victim of the global financial crisis, has already reached a tentative deal with the International Monetary Fund for a $2 billion (1.2 billion pounds) loan and has been turning to other potential lenders as it tries to fix a broken financial system and revive its economy.

The IMF loan still needs approval by the fund's board.

The spokeswoman confirmed remarks by Prime Minister Geir Haarde, who was quoted by local Web site visir.is as saying an EU loan was being looked at but that it was too early to talk about its potential size or terms.

"It is now in the hands of the (European) Commission and then it will go through the European Parliament," the spokeswoman said. "It's a somewhat long procedure."

Although Iceland is not an EU member, the spokeswoman said she believed the crisis fund could be used for certain selected neighbours.

However, a spokeswoman for EU president France said when asked about the matter: "I am not aware of that."

According to the published remarks, Haarde said he had written to French President Nicolas Sarkozy about Iceland's plight.

"The origins (of the EU loan discussion) are probably in that I wrote a letter to French President Sarkozy earlier this month to explain the situation," Haarde told the Web site.