Icelandic voters vented their fury at the bankers and politicians who ruined their economy by overwhelmingly rejecting a €4bn to repay debts to Britain and the Netherlands, early results showed.

The outcome of the referendum had not been in doubt since Iceland had recently been offered better repayment terms than those contained in the deal on which residents were voting.

Partial referendum results from around a third of the cast votes showed 93% opposed the deal and less than 2% supported it. The rest cast invalid votes.

But the rejection will still have major repercussions, keeping financial aid on hold and threatening to undermine the centre-left government of Prime Minister Johanna Sigurdardottir.

'This has no impact on the life of the government. We need to keep going and finish the (Icesave) debate. We have to get an agreement,' Ms Sigurdardottir told public television.

The referendum, Iceland's first since independence from Denmark in 1944, was forced by the refusal of Iceland's president Olafur Ragnar Grimsson to sign a law in January on repayment terms negotiated by the government and approved by parliament.

He cited public anger at the time. Since then, the anger of the people on this recession-hit island has only grown.

While polls show Icelandic people believe the debts should be repaid, residents bitterly resent being stuck with a bill for the mistakes of a handful of bankers under the watch of foreign governments.