A mixture of bad business and greed has hurt the Pacific island

Nauru's President Rene Harris agreed to a $17m (�9.5m) rescue plan in Melbourne on Monday, as receivers moved in to seize the island's last assets.

US financier GE Capital is attempting to recover part of a $170m loan that was linked to property investments.

Australia has previously given aid to the once wealthy island, which is now a processing centre for asylum seekers.

Stolen funds

Australia's foreign minister Alexander Downer who announced the rescue plan, said his country is committed to "working co-operatively with Nauru".

The island's rich reserves of phosphates - an ingredient for high-grade fertiliser - created enormous wealth during the 1970s and 1980s.

The island's 10,000 inhabitants enjoyed one of the world's highest standards of living, thanks in part to tax exemptions and immigrant labour that performed all menial jobs.

But once the phosphates started to run out, Nauru's finances collapsed - and it has emerged that much of the money salted away in investments has been either lost or stolen.

Infrastructure has collapsed, and payment problems have frequently led to the island being cut off from supplies, including fresh food.

And unpaid bills mean that Nauruans, among the unhealthiest people in the world after decades of prosperous idleness, are no longer able to fly to Australia for subsidised medical care.

Reforms

Australia said in March that it would provide Nauru with around $17m to help stabilise the island's economy and help it bolster law and order.

Asylum-seekers may provide a lifeline for Nauru

But Australian officials said GE's attempt to recover its loan was a commercial affair and not one for it to solve.

Instead, the Australian team will aim to quickly audit and assess Nauru's remaining assets and liabilities before deciding on a re-organisation of the island's financial affairs.

"We will also help Nauru implement long-lasting financial management and law and justice reforms," Mr Downer said.

Organised crime

The island in the past has made strenuous attempts to diversify its economy.

A major shift into offshore financial services during the 1990s seemed promising, but has resulted in Nauru becoming a major haven for organised-crime financing - and being blacklisted for money laundering by both the US Government and international bodies.

Policy-making has been hampered by chronic instability.

Governments have come and gone, and the parliamentary speaker resigned earlier this month, paralysing the legislature.

The country's telecoms system collapsed last year, leading to a period of looting and rioting and the complete breakdown of government services.

Over the past two years, however, Nauru has developed closer ties to Australia.

Canberra has courted controversy at home by stationing a detention centre for asylum-seekers on the island - part of its policy of keeping refugees at arm's length.

For Nauru, the deal has been a lucrative business.

There have been reports that the island's inhabitants could be given Australian citizenship as a reward for their help with asylum.