People protest in the streets of Reykjavik. Iceland is under pressure to negotiate better terms after a referendum resoundingly rejected a deal to pay Britain and The Netherlands billions for losses in the Icesave bank collapse.With more than 93 percent of voters in Saturday's referendum rejecting the deal according to near-final results, Iceland's leftwing government had to radically rethink an Icesave compensation agreement, observers said.
Britain's Treasury said meanwhile it was still "committed" to securing a deal with Iceland.
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The results were "such a decisive statement that the government cannot keep the same negotiation basis as before," said Olafur Isleifsson, an economics professor at the University of Reykjavik.
"This is a demand for a resolution of this matter on totally new grounds that do not threaten the economic independence of" Iceland, he told AFP.
About 230,000 Icelanders were called to polling stations Saturday to vote whether the country should honour an agreement to by 2024 repay Britain and The Netherlands 3.9 billion euros (5.3 billion dollars) at a high 5.5-percent interest rate.
This would be to compensate the countries for money they paid to 340,000 of their citizens hit by the collapse of Icesave in 2008.
Related article: Events leading to Iceland bank payout referendum
The overwhelming "nei" vote was "nothing that comes as a surprise," Prime Minister Johanna Sigurdardottir acknowledged to the RUV broadcaster late Saturday.
"After this referendum it is our job to start finishing the negotiations," added Sigurdardottir, who on Friday described the plebiscite as "meaningless" and said she would not vote.
But President Olafur Ragnar Grimsson, whose refusal to sign a compensation bill voted through parliament in December led directly to the referendum, said it had been important to hold the vote.
"I think the outcome of this referendum can be seen as a strong expression of the public will," he told AFP before Saturday's result.
Some observers had warned that a "no" vote might delay the payment of the remaining half of an International Monetary Fund rescue package worth 2.1-billion dollars.
There were also fears it could hit European Union and euro currency membership talks, as well as Iceland's credit rating.
But a European Commission spokeswoman, asked Sunday about repercussions of the result for Iceland's entry into the European Union, said the Icesave matter and the membership bid were "two separate processes".
The chief editor of the Frettabladid daily, Olafur Stethenssen, said time was of the essence when it came to finding a new Icesave agreement.
"The delays can cost a lot to the Icelandic recovery," he told AFP.
"Now that the referendum has taken place, (a new deal) will have to happen in the coming weeks," he stressed.
Perhaps most vulnerable after Icelanders' massive "nei" vote is the future of the country's leftwing government, which negotiated the agreement considered by many as little more than a foreign diktat.
"The government stands weak after this result," said Eirikur Bergmann Einarsson, a political science professor at the Bifrost University.
Finance Minister Steingrimur Sigfusson, who has headed up talks with Britain and The Netherlands, had in particular "put his political life on the line, and the life of the government is hanging by a thread," he told AFP.
The government "needs to face a nation which has rejected the solution (it) offered," Einarsson said.
He said the referendum results should also send a clear message to Britain and The Netherlands that: "Iceland will not be bullied into an unjust agreement."
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