Voters in Iceland have overwhelmingly rejected proposals to pay the UK and the Netherlands in the wake of collapse of the Icesave bank, BBC reports.

With a third of results counted, 93% of voters said "No" in a referendum.

Iceland's prime minister says her government will remain in office and continue to seek a repayment deal.

The British and Dutch governments want reimbursement for the 3.8bn euros they paid out in compensation to customers in 2008.

Talks between Iceland, the UK and the Netherlands three countries broke down on Friday without agreement.

Prime Minister Johanna Sigurdardottir said she would not vote in Saturday's poll as her government was seeking to continue the negotiations.

With a third of votes counted, 93% of Icelanders have voted "No", less than 2% back the deal, and the remaining votes are invalid.

Mrs Sigurdardottir said that her government would stay in office, despite the "No" results.

"Now we need to get on with the task in front of us, namely to finish the negotiations with the Dutch and the British."

During voting on Saturday, hundreds of protesters outside parliament in the capital Reykjavik banged pots and waved banners reading "Icesave No! No! No!".

As results came in, Foreign Minister Ossur Skarphethinsson said talks with the UK and the Netherlands would continue, adding that the referendum result was good for his government's position.

"It certainly doesn't weaken our hand," Mr Skarphethinsson said.

The government had hoped to avoid the vote by agreeing a new repayment plan before the weekend.

Mr Skarphethinsson told Reuters news agency he expected a new Icesave deal "in the next weeks, perhaps sooner".

Britain and the Netherlands want the money as repayment for bailing out customers in the Icesave online bank, which folded in 2008 due to the global financial meltdown.