Iceland overwhelmingly rejected a referendum on Saturday to compensate Britain and the Netherlands for money lost when an Icelandic bank collapsed in 2008.

Projections showed 93.1 per cent voted against the proposal, with just 1.6 per cent voting in favour.

At issue is paying $5.4 billion back to the Governments in London and Amsterdam who compensated their own national savers when they lost money when the Icesave bank collapsed amid the financial turmoil of 2008.

The repayment was formalised in an agreement between the three countries last year.

Britain and the Netherlands have insisted on repayment, even as Iceland’s politicians have called the move onerous as the nation undergoes a painful financial restructuring.

Iceland’s Prime Minister, Johanna Sigurdadottir, has said she will not vote in the referendum, Iceland’s first, saying she thought it “sad” that the vote had to be taken.

Surveys ahead of the vote suggested two-thirds of the 235,000 people eligible to vote would reject the referendum and, thus, the repayment. The referendum was called by the President in early January after he was swayed by a citizens’ protest.

Talks between the three nations are ongoing to see if a more favourable deal for Iceland might be negotiated.

More In: International | News