The decision by Finland, Sweden, Norway and Denmark came after the International Monetary Fund announced it had approved a US$2.1 billion support package for Iceland, ministry spokesman Martti Hetemaki said.

'We have a joint desire among the Nordics to help Iceland in extremely difficult economic conditions,' Hetemaki told Finnish broadcaster YLE. 'The money will be used to stabilize the currency and finance its imports.' Last month, Icelandic Prime Minister Geir Haarde told his Nordic partners in Helsinki that his country needs some US$6 billion to recover from the meltdown. They pledged a loan package after a decision by the International Monetary Fund to help Iceland.

On Wednesday, the IMF finally approved the two-year, US$2.1 billion support program designed to restore confidence and stabilise Iceland's shattered economy.

The approval had been held up because of a British-Icelandic dispute over Britons' accounts in failed Icelandic banks.

Iceland needs the financing to buy imports and support its currency, which has lost around two-thirds of its value since the beginning of the year because of the collapse of its banking system.

Both the IMF and the European Union, of which Iceland is not a member, told Reykjavik that they would not give loans to Iceland until the dispute with Britain was settled. On Sunday, Haarde agreed to guarantee the money.

Iceland earlier had said depositors would get up to US$26,600. While Iceland is not part of the EU, its membership in the European Economic Area allows the country to participate in a free economic zone along with European Union member states.

Iceland's banking system has collapsed amid the global credit crunch. The country's currency, the krona, has lost half its value since January. Banking transactions to and from the island nation in the middle of the North Atlantic have seized up, leaving its population of 320,000 virtually stranded. -- AP