Iceland gets $10 billion in aid

By Omar Valdimarsson and Sakari Suoninen

REYKJAVIK/HELSINKI (Reuters) - Iceland secured pledges of support from European countries on Thursday to help the country rebuild its shattered financial system, boosting total aid, including an IMF-led package, to over $10 billion (6 billion pounds).

The cornerstone of the rescue package is a $2.1 billion loan from the International Monetary Fund, a deal agreed late on Wednesday after weeks of delays due to wrangling between Iceland and some European nations.

That will be complemented by more than $3 billion in loans from Nordic countries, Russia and Poland as well as special financing arrangements of close to $5 billion or more by Britain, the Netherlands and Germany.

Russia's involvement, while not specified, was scaled down vastly after initial discussions about a multi-billion euro loan. The idea that Russia would extend its influence into NATO member Iceland had raised questions in diplomatic circles, while Moscow this week played down talk of how much it could lend.

Iceland fell prey to the global financial crisis as its currency plunged and its financial system crashed last month under the weight of tens of billions of dollars of foreign debts incurred by its banks, three of which failed.

"The whole IMF package, which includes British and Dutch loans to the Icelandic deposit guarantee agency, is about $10.2 billion, out of which the Nordic countries' share is about a quarter," Finland Finance Ministry Under-Secretary Martti Hetemaki told Reuters.

Britain, the Netherlands and Germany issued a statement saying they would provide "pre-financing" to help Iceland meet foreign deposit obligations. The IMF, in a conference call on Thursday, estimated those obligations at $5-6 billion.

The first priority is to make the Icelandic crown a functional currency again so that the island can begin to trade more normally.