Reykjavik/Oslo - Norway and Britain were Wednesday reported to be considering loans and other assistance to financially-troubled Iceland.

The economy of the North Atlantic nation of some 300,000 people has come under severe strain amid the global credit crunch.

A Norwegian delegation was heading for Iceland to discuss the situation and "how Norway can possibly help," Norwegian Transport and Communications Minister Liv Signe Navarsete told broadcaster NRK.

Navasarsete said that in addtion to more loans, the assistance could include offering expertise, while other proposals may surface during the discussions.

A week ago, the Icelandic central bank said it drew 400 million euros (543 million dollars) from the central banks of Denmark and Norway in accordance with a May agreement it made with the central banks of Denmark, Norway and Sweden.

The Financial Times reported that Reykjavik was in talks with the British goverment regarding a loan worth some 5.1 billion dollars.

The funds were aimed to cover deposits of some 300,000 British savers holding deposits in the collapsed Icelandic internet bank Icesave.

Icesave was operated by Landsbanki, one of the Iceland's three largest banks, recently nationalized under special legislation.

The commercial banks have run up liabilities at least five times that of Iceland's gross national product in recent years. (dpa)