Iceland has called on the International Monetary Fund for $2 billion in aid to help fix its broken banking system, restart currency trading and soften the blow from a withering economic downturn.
The IMF lender said its staff in Reykjavik and Icelandic authorities had reached agreement on an economic programme that would be supported by the financial assistance.
"The goal is to restore faith in the Icelandic economy and stabilise the currency and restructure the banking system," Prime Minister Geir Haarde told a news conference broadcast on national television.
The deal still needs to be approved by the IMF board and Mr Haarde said he expected it would take about 10 days for the review to take place.
Iceland's financial system has all but collapsed and its economy is suffering badly after the country was forced to take over three of its biggest, debt-laden banks this month.
Paul Thomsen, head of an IMF mission in Iceland, said the economy could contract as much as 10 per cent next year.
The north Atlantic island of just 300,000 people has become the first national victim of a global crisis that has felled some of the biggest names on Wall Street and sparked panic in financial markets.
International trade in Iceland's krona has ceased, a dispute has broken out with Britain over deposits held in Icelandic accounts and the country has begun a wide search for assistance.
The prime minister said total funding needs had not been quantified exactly. "With the $2 billion from IMF, that would be a good part of it, but I think we still need several billion in addition," he said.