Poland offers $200 million to crisis-hit Iceland

STOCKHOLM (Reuters) - Poland offered Iceland on Friday $200 million as part of $6 billion Reykjavik is seeking to rebuild its shattered economy.

Warsaw said contributions were also expected from Britain, the Netherlands and the Nordic countries. The North Atlantic island has already made a provisional deal for a loan of $2 billion from the International Monetary Fund.

Iceland is facing a deep recession after the global financial crisis sparked the collapse of three of its major banks and a steep dive in its currency.

"Poland has agreed to join a consortium of countries, which will provide financial assistance to Iceland," the Polish Finance Ministry said in a statement.

"The consortium is expected to consist of the IMF, Scandinavian countries, the United Kingdom, the Netherlands and Poland."

On top of the IMF's $2 billion, Iceland has said it wants an additional $4 billion from other lenders and has held discussions with its Nordic neighbors, Russia, Japan and the European Union.

Prime Minister Geir Haarde said on Thursday the IMF board would meet on November 10 to decide on whether to grant its loan.

Poland said the group planned to offer $6 billion with the its contribution likely to amount to $200 million.

Britain declined to comment. The government of the Netherlands could not immediately be reached for a comment.

LENDERS

Norway said this week it would lend Iceland 500 million euros ($644 million) while the Faroe Islands, with a population of just 48,000, has offered 300 million Danish crowns ($51.6 million).

Finland's central bank chief and European Central Bank Governing Council member Erkki Liikanen told Finnish television on Friday negotiations with lenders were ongoing.

"The IMF has made a preliminary decision to aid Iceland, but its resources are not big enough, so a significant part of funding is being sought from other sources, including the Nordics," Liikanen said.

He said any eventual contributions by the Nordic countries would probably be relative to the size of their economies.

Sweden's central bank said it was waiting for the IMF to approve the $2 billion loan.

Per Jansson, state secretary at Sweden's Finance Ministry said a Nordic group, set up at the end of October to look at how to help Iceland, had not discussed the level of possible aid, but that money was very likely to be forthcoming as part of an IMF-led package.

The challenges facing Iceland, home to just 300,000 people, are immense.

The banking collapse alone could cost as much as 1.1 trillion Iceland crowns ($8.6 billion), according Haarde. This would be equivalent of 85 percent of the country's gross domestic product in 2007. The economy is expected by some to shrink 10 percent next year.

(Reporting by Patryk Wasilewski in Warsaw, Sakari Suoninen in Helsinki and Anna Ringstrom in Stockholm, editing by Mike Peacock)