Iceland rejects deal of debt to repay UK, Netherlands (AP)

REYKJAVIK, Iceland - in Iceland voters rejected a deal backed by the Government to reimburse Britain and the Netherlands for their citizens $5 billion in deposits in a bank line failed, the referendum results showed Sunday - send case before a tribunal international and plunged the economically fragile country into uncertainty again.

Final results showed that the "no" side had little less 60% of the votes and the side "Yes" approximately 40 per cent.

The result reflects the anger of the Icelanders have to pay for the excesses of their bankers and complicates the resumption of economic collapse.

It is the second time voters defeated a bid to resolve the bitter dispute arising from the collapse of the banking sector gripper of the Iceland in 2008, and the Government said that it would be the last.

"We are at the end of the road to a negotiated solution," said Finance Minister Steingrimur Sigfusson.

He said that Iceland would now opt for "Plan B", with the dispute to the Court of the European Free Trade Association, which could impose more stringent conditions on the Iceland as those rejected in the vote on Saturday.

Britain and the Netherlands said they would fight to recover the money that they spent their citizens who had accounts in the banks bankrupt, Icesave compensation.

The Minister of Dutch Finance Jan Kees de Jager said the outcome of the referendum "is not good for the Iceland and also good for the Netherlands step."

"The time for negotiations has passed," he said. "The Iceland always has the obligation to repay us." It's now a case to the courts. ?

British Finance Minister Danny Alexander said "we have the obligation to obtain this money, and we will continue to pursue only until we do."

"We have a financial very, very difficult situation as a country, Alexander told the BBC." This money, of course, would help. ?

Icelandic Minister Johanna Sigurdardottir said the results are disappointing, but it would try to prevent political and economic chaos that would ensue. Sigfusson, said the result would have no effect on the Iceland existing debt repayments and would not derail its bid for membership of the European Union.

A tiny nation of the North Atlantic with a population of only 320 000, Iceland goes from child prodigy economic in Britain financial almost any night when grabbed by the credit crunch.

Its major banks - that it is extended to dwarf the rest of the economy of the Iceland during a decade of boom fueled credit - collapsed within a week in October 2008, its the Crown currency collapsed and protests overthrew the Government.

Savings of Icelandic citizens was protected by an unlimited guarantee of national filings, but no such rule is applied to many foreigners attracted by the Icelandic banks by their high interest accounts.

Some 340 000 British and Dutch investors had filed more than 5 billion to the Icesave. After the collapse of Icesave, the British and Dutch authorities borrowed money to compensate their citizens, then turned to the Iceland for repayment.

The dispute has grown bitter, with Britain and the Netherlands threatens to block the OPA of the Iceland to join the European Union, unless it is resolved.

Failure to approve an agreement also blocked payments of a loan of the Monetary Fund $ 4.6 billion International.

Sigfusson, said the Government would have talks with those who have lent money to the Iceland, the IMF, the Nordic countries and the Poland - after the defeat of the referendum.

"We have made substantial progress moving of the crisis in 2008, and we intend to keep doing despite this result," he said.

Icelandic massively rejected a previous agreement in a referendum last year, but the Government had hoped that a new agreement on the best conditions prevail approval.

The Icesave debt was initially put at 5.3 billion - a paralysing burden for the small country - but backers of the transaction was rejected said cost Iceland less kronur 50 billion ($444 million)with the assets recovered from the parent bank of the IcesaveLandsbanki, covering the majority of the debt.

The agreement was reached in December after long negotiations between the three countries and approved by the Parliament of the Iceland in January. But the President Olafur Ragnar Grimsson vetoed in public opposition strong.

The President welcomed the referendum and the high rate of participation of 75%, as a cathartic phase for the Iceland.

He said financial collapse had paralyzed the will of the nation and undermined the courage of our people. ?

"The two referendums on the issue of Icesave have enabled the nation to regain its confidence in itself democratic and to express sovereign authority in its own affairs and determine the outcome of difficult issues," said Grimsson.

Opposition politicians asked the Government to hold new elections, but Sigfusson, said that the centre-left coalition would not resign.

"It was a referendum on Icesave case, not on the Government," he said.

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David MacDougall in Reykjavik, Jill Lawless London and Toby Sterling in Amsterdam contributed to this report.

(This adds version corrects turnout, quote of the President.) Corrects the name of the President of Grimsson, not Grisson. (This story is part of General news and financial services of the AP.)

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