Nov. 10 (Bloomberg) -- Iceland may get a ``small'' loan from the European Union as the Atlantic island tries to scrape together enough funds to stabilize its currency and resurrect the economy.

``This should be seen more as a political gesture, as a complement'' to money from the International Monetary Fund, European Commission spokesman Johannes Laitenberger told reporters in Brussels today. He declined to specify an amount.

The IMF on Oct. 24 agreed to lend Iceland $2.1 billion after the country's three largest banks failed and its currency collapsed. Prime Minister Geir Haarde has said a total of $6 billion will be needed to salvage the economy, which the IMF estimates will contract as much as 10 percent next year.

The Washington-based lender wants more information on how much Iceland will be able to borrow from other countries before the loan is approved, the newspaper Morgunbladid said today, citing Haarde. The Fund's executive board has yet to schedule a meeting to approve the loan, Haarde said.

``I hope it will be held as soon as possible,'' the prime minister told the Reykjavik-based newspaper.

The island has so far secured a 500 million euro ($635 million) loan from Norway, 300 million kroner ($51 million) from the Faroe Islands and $200 million from Poland. Norway also agreed to extend through 2009 a 500 million euro swap facility agreed in May.

Exchange Rate

The currency collapsed following the government's takeover of Kaupthing Bank hf, Landsbanki Islands hf and Glitnir Bank hf after the lenders were unable to secure short-term funding. Since the collapse of the banks, the central bank has rationed the supply of krona, holding daily auctions that value the currency at about 165 against the euro. That compares with about 90 kronur per euro at the beginning of the year.

The central bank on Oct. 10 asked businesses to prioritize foreign currency use for essential imports such as food, fuel and medicine.

Iceland has already drawn 200 million euros from the Norwegian swap deal and the same again from an equivalent Danish agreement on Oct. 14. It has yet to draw on a 500 million euro swap facility entered with Sweden.

``We have received a request from Iceland to draw on it, but we have said that we're waiting for the IMF program on Iceland to be decided on,'' said Tomas Lundberg, a press officer at the Stockholm-based Riksbank. ``They cannot draw on it until the executive board of the Riksbank decides.''

Swaps

Danish central bank spokesman Karsten Biltoft declined to comment on the terms of Denmark's swap facility. An agreement to draw on the swap facility is also required by Norway.

``The swap agreements and the arrangements are the same'' between Iceland and the three Nordic central banks, Audun Gronn, director of international department at the Oslo-based Norges Bank said. ``There has to be an agreement on a drawing.''

The IMF agreed to help Iceland after the island put together an ``ambitious'' economic program aimed at restoring confidence in its financial system and reviving the currency, the Fund's Managing Director Dominique Strauss-Kahn said on Oct. 24. The island ``deserves the support of the international community,'' he said.

Haarde also told radio RUV on Saturday that he had written a letter to the government of China requesting a loan.

``We have had informal discussions with them for a while,'' Haarde told the radio station. ``I don´t think it is any secret that I have written to the Chinese Prime Minister and asked for his participation in this matter. We are open to their suggestions for a loan amount, but they have not answered yet.''

To contact the reporter on this story: John Rega in Brussels at jrega@bloomberg.net.

Last Updated: November 10, 2008 09:42 EST