Icelanders say No to repaying £3.4bn

ICELANDIC voters overwhelmingly rejected a £3.4 billion deal to repay debts to Britain and the Netherlands, according to indications last night.

Partial referendum results from about 18,000 voters showed 98 per cent opposed the deal.

Iceland's 230,000 voters were being asked to approve an agreement on paying back Britain and the Netherlands, which had compensated savers who lost money in online "Icesave" accounts run by the failed Icelandic bank Landsbanki.

The result will jeopardise the country's credit rating, making it much harder to access money from the International Monetary Fund and could harm Iceland's chances of joining the EU.

However Iceland's prime minister Johanna Sigurdardottir said her centre-left government would remain in office.

"This has no impact on the life of the government. We need to keep going and finish the (Icesave] debate. We have to get an agreement," she said.

The global financial crisis hit particularly hard in Iceland. The country's three main banks, hobbled by massive debts run up during a period of rapid expansion, collapsed within the space of a week in October 2008, and the krona plummeted.

The poll is expected to reject the payment of 2.3bn to Britain and 1.1bn to the Netherlands as compensation for funds that those governments paid to about 340,000 of their citizens with Icesave accounts. Many Icelanders object to the terms of the deal, not the idea of payment itself.

"I voted No," said Rognvaldur Hoskuldsson, a 36 year-old machine technologist, after casting his vote. "We have to send a message that these countries are not going to profit from this situation."