US grants Turkey $8.5bn loan

The United States has agreed to lend Turkey $8.5bn as compensation for the damage its economy suffered during the Iraq war.

US Treasury Secretary John Snow negotiated the deal with Turkish officials on the sidelines of meetings of the International Monetary Fund (IMF) in Dubai.

The loan was first proposed during the Iraq war even though Turkey had turned down a US request to move tens of thousands of American troops through the country into northern Iraq.

There are conditions to the loan. Turkey must implement what strong economic policies and cooperate with the US over Iraq.

Some say that's a reference to Turkey sending troops to Iraq, something the government is now considering.

But both the US and Turkey deny any link between the loan and the question of Turkish troop deployment.

"This assistance package offered by the US to Turkey and the deployment of Turkish troops in Iraq are two separate issues," Mr Snow said.

The war with Iraq had threatened to hamper Turkey's economic recovery.

Turkey has also borrowed $15bn from the IMF to help stabilise its currency over the past two years as it faced its worse economic crisis since 1945.