( CNN ) -- Nordic countries agreed to lend struggling Iceland $ 2.5 billion to help it recover from a series of crippling bank failures , bolstering a $ 2.1 billion aid package from the International Monetary Fund , their governments announced Thursday . Prime Minister Geir Haarde has been trying to drum up support for Iceland 's bailout . `` This is a first step to get Iceland out of its current serious financial and economic situation , '' the governments of Finland , Norway , Denmark and Sweden announced in a joint statement . `` The banking crisis in Iceland is of unprecedented proportions and has serious implications for the country 's economy . '' The statement follows the IMF 's decision on Wednesday to pump about $ 827 million into the Icelandic economy immediately , with another $ 1.3 billion coming in eight installments . Both moves are aimed at stabilizing Iceland 's finances and shoring up its currency , which plummeted after a series of bank failures in October . Iceland sought IMF help after its government was forced to nationalize three banks to head off a complete collapse of its financial system . Trading on the country 's stock market was suspended for nearly a week , economic growth nearly flatlined and inflation jumped to more than 12 percent . `` As a result , Iceland is facing a severe recession , given the high debt level in the economy and significant dependence of the private sector on foreign currency and inflation-indexed debt , '' John Lipsky , the IMF 's acting chairman , said in a statement announcing the decision . The IMF move marks the first time the international lender has had to funnel money to a Western European country in 25 years . Lipsky said Iceland 's highly-educated workers and resource base gives it `` favorable '' prospects for long-term growth , but he cautioned , `` The road ahead is difficult . '' `` The program is subject to exceptionally large uncertainty and significant risks , reflecting the unprecedented magnitude of the banking sector collapse , '' he said . The package requires Iceland to restructure its banking industry , which had grown rapidly since the 1990s , and cut its government debt . `` The work with implementing the IMF program will not be easy , but given appropriate measures , we believe that there is a good basis for rebalancing the economy , '' the Nordic countries ' statement read . `` We stand ready to assist Iceland in the spirit of continuous Nordic cooperation . ''
Help comes from Finland , Finland , Finland and Sweden . The IMF will pump about $ 827 million into the Nordic economy immediately . The goal is to stabilize the country 's finances and shore up its currency . Denmark is facing severe recession after a series of bank failures in 25 years .