An international bail-out of crisis-hit Iceland appeared to be unravelling last night as the International Monetary Fund withheld official backing for the $6bn plan. Iceland has also been left with a $500m shortfall in the funds for the plan that it had hoped to raise from other international donors.

Iceland agreed a $2.1bn (€1.7bn, £1.4bn) loan with the IMF on October 24 that was due to be approved by its board last Tuesday but which was delayed until the following Friday, postponed again to Monday and has now been put back to an unknown date.