Voters in Iceland have resoundingly rejected a law to compensate the United Kingdom and the Netherlands for savings lost in the collapse of Icesave, a bank, in 2008.

According to preliminary figures, 93% voted against the law in a referendum yesterday (6 March). Opponents said that the Icesave bill would saddle Iceland’s public finances with an unsustainable debt burden. Final results are expected later today.

Iceland’s centre-left government says that it has been re-negotiating the deal with the Dutch and the British and that it is hopeful that an agreement can be reached. The two governments have offered better repayment terms for Iceland. A spokesperson for the British treasury said after the referendum that the UK remained “committed to reaching a final agreement with Iceland in due course”. He added that the result of the referendum was “a matter for Iceland”.

The defeat had been predicted and may have no major practical implications given that the three governments are negotiating an improved deal. It is still, however, a further blow to Iceland’s government, which had proposed the law. The failure to get a deal on Icesave agreed and implemented had already prompted the International Monetary Fund (IMF) to suspend a loan that Iceland urgently needs.

Last month, the European Commission recommended that the European Union should begin talk with Iceland on the country’s possible membership. The Icesave issue, if unresolved, could greatly complicate accession talks. EU membership faces strong popular opposition.

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