Oct 27, 2008, 19:45 GMT
Helsinki - Nordic nations on Monday promised to review cash- strapped Iceland's need for additional loans, and were to form a working group that would monitor Reykjavik's efforts to revive its economy.
Swedish Prime Minister Fredrik Reinfeldt, current chair of the Nordic Council, said the Nordic group welcomed the deal Iceland signed on Friday with the International Monetary Fund (IMF) for a 2.1-billion-dollar emergency loan from the IMF to help stabilize Iceland's economy.
Reinfeldt told a news conference that the Nordic IMF members would support the deal when the IMF board was to meet to give formal approval.
Regarding loans to Iceland, the premiers had not agreed on specific sums, Reinfeldt said, while Finnish premier Matti Vanhanen noted that the central banks were independent.
Estimates suggest Iceland needs an additional 4 billion dollars in loans.
Iceland's Prime Minister Geir Haarde said he was 'grateful' for the expression of support, adding 'we respect the division of labour between governments and the central banks.'
The joint statement welcomed Iceland's commitment to reform its economy and called for improved 'early warning'-systems to avert similar crises.
Prior to the meeting, Haarde told reporters that economic output in Iceland was estimated to drop some 10 per cent next year.
The global financial crisis was one of the main topics at the meeting of the Nordic Council organization that groups Denmark, Finland, Iceland, Norway and Sweden as well as three self-ruling territories including Greenland.
Haarde said many of Iceland's 320,000 inhabitants will be hit by the crisis that has seen the collapse of its three largest commercial banks.
It will be 'painful,' he said, stating that some will lose their jobs, others will lose their savings, and that the crisis will set Iceland back some five years.
The deal with the IMF, that needs approval by the IMF board, was the first by a Western country since the mid-1970s when Britain signed a similar deal.
Haarde said a possible deal with the Nordics would not rule out a possible deal with Russia, referring to recent talks held in Moscow.
The central banks of Denmark, Norway and Sweden in May signed a swap facility arrangement with the Icelandic central bank which recently drew 400 million euros (543 million dollars) from Denmark and Norway.
The financial unrest has fuelled support in Iceland for joining the European Union, according to a poll commissioned by the Frettabladid newspaper.
The weekend poll of some 800 people suggested more than two in three supported an EU application, up from one in two in February.
Haarde, whose Independence Party has opposed joining the bloc, said discussions about membership would have to await the resolution of the crisis.
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