Fantastic country is fine, with a lake (6)
I believe the answer is:
faerie
'fantastic country' is the definition.
(fairyland)
'fine with a lake' is the wordplay.
'fine' becomes 'f' (abbreviation e.g. condition of old coins, books).
'with' is a charade indicator (letters next to each other).
'lake' becomes 'erie' (Lake Erie is one of the Canadian/US 'Great Lakes').
'f'+'a'+'erie'='FAERIE'
'is' acts as a link.
(Other definitions for faerie that I've seen before include "Imaginary land; Spenser's Queene" , "The land of the little people" , "purveyor of magic" , "The . . . . . . Queen (Spenser)" .)