Final results showed the "no" side had just under 60 percent of the votes and the "yes" side about 40 percent.

 

The result reflects Icelanders' anger at having to pay for the excesses of their bankers, and complicates the country's recovery from economic meltdown. It is the second time voters have defeated a bid to settle the bitter dispute stemming from the collapse of Iceland's high-flying banking sector in 2008, and the government said it would be the last.

 

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

 

He said Iceland would now opt for "Plan B", with the dispute going to the European Free Trade Association court which could impose harsher terms on Iceland than those rejected in Saturday's vote.

Britain and the Netherlands said they would fight to get back the money they spent compensating their citizens who had accounts in the failed bank, Icesave.

Dutch Finance Minister, Jan Kees de Jager, said the referendum result "is not good for Iceland and also not good for the Netherlands." "The time for negotiations has passed," he said. "Iceland still has the obligation to pay us back. This is now a case for the courts."

British Treasury Minister, Danny Alexander, said "we have an obligation to get that money back, and we will continue to pursue that until we do."

Press release