ICELANDERS HAVE REJECTED a proposal to repay some €4 billion owed to the UK and the Netherlands as a result of the collapse of an online bank.

Partial results from yesterday’s referendum show that 58 per cent of the population voted no while 42 per cent supported the plan, the BBC reports.

It is the second time a referendum has rejected a repayment deal and the case is now set for the international courts.

The poll came as a result of the collapse of the online bank Icesave in 2008 which cost investors from the UK and the Netherlands some €4 billion.

Governments from both countries reimbursed 400,000 citizens and Iceland had to decide how to repay the money.

A previous referendum rejected the proposal by a massive 93 per cent but yesterday’s outcome provided little comfort to Prime Minister Johanna Sigurdardottir, Reuters reports.

She told state TV:

The worst option was chosen. The vote has split the nation in two.

Under the terms of the rejected deal, Iceland would have paid the money back with interest of 3.3 per cent to the UK, and 3 per cent to the Netherlands over a 30 year period between 2016 and 2046.

The previously rejected proposed that the money be paid back with 5.5 per cent interest for a shorter period between 2016 and 2024.

The case will now go to the European Free Trade Association Surveillance Authority which could be a lengthy process, according to The Economic Times.