7 Mar 2010

Iceland rejects bank repayment plan

2:18 pm on 7 March 2010

Voters in Iceland have overwhelmingly rejected proposals to repay Britain and the Netherlands in the wake of collapse of the Icesave bank.

With a third of results counted on Saturday, 93% of voters said 'no' in a referendum: 2% backed the deal and the remaining votes were invalid.

Prime Minister Johanna Sigurdardottir said her government would remain in office and continue to seek a deal.

The British and Dutch governments want reimbursement for 3.8 billion euros ($US5.2 billion) they paid in compensation to customers in 2008.

The government had hoped to avoid the vote by reaching a new repayment plan before the weekend.

However, talks between Iceland, the UK and the Netherlands broke down on Friday without agreement.

Polls closed at 2200 GMT.

The BBC reports the government approved the repayment plan last December but it was blocked by President Olaf Ragnar Grimsson in January, which led to the referendum being called.

Mr Grimsson has rejected suggestions the vote is meaningless, telling the BBC that a strong 'no' would strengthen Iceland's hand in the negotiations.