Norway, Sweden and Denmark banded together this week to offer Iceland a credit line of $2.4 billion in an effort to shore up its krona currency and battle hedge fund speculators, The Daily Telegraph reported. The move would double the country's foreign reserve cover.

Danske Bank economist Lars Christensen expressed hope the deal would pose barriers for hedge fund speculators to "short" the krona, but probably wouldn't keep Iceland from entering into a deep recession.

"Economically, this changes nothing," he told the British newspaper. "Iceland is one of the most indebted countries in the world."

The newspaper said Iceland's banks have been heavy borrowers in global capital markets, using the funds to stage sometimes hostile takeover attempts on European companies. Now, however, their efforts have resulted in high domestic interest rates and double-digit inflation.