Brussels considering "small" loan to Iceland

Nov 10, 2008, 12:32 GMT

Brussels - The European Commission said Monday it was considering lending a 'small' amount of money to cash-strapped Iceland, but only after its government resolved its disputes with European Union member states such as Britain.

'The commission plans to propose to the member states and the European Parliament macro financial assistance in the form of loans, supplementing a program by the International Monetary Fund (IMF),' said Johannes Laitenberger, spokesman for the EU executive in Brussels.

'However, this can only be done after Iceland and some EU member states reach an agreement on bilateral issues related to the deposit guarantee scheme and the protection of foreign depositors,' Laitenberger said.

Moreover, because of the commission's limited resources in the light of possible additional requests from other non-EU member states, the commission's assistance would be 'small,' the spokesman said, without disclosing the exact amount.

'It should be seen more as a political gesture,' Laitenberger said.

The move follows a formal request to Brussels by the government of Iceland, which has been struggling to cope with the global credit crunch.

Iceland is hoping to obtain 2.1 billion dollars from the IMF and is seeking an additional 4 billion dollars from Scandinavian and European countries including Britain and the Netherlands to counter a recession.

Last month, Britain froze Icelandic bank assets in its territory because of a dispute over bank deposit guarantees.