By Anna Ringstrom and Omar Valdimarsson
REYKJAVIK (Reuters) - Voters in Iceland appeared on Sunday to have rejected for a second time a plan to repay debts to Britain and the Netherlands from a bank crash, a move the prime minister said risked economic and political chaos.
"The worst option was chosen. The vote has split the nation in two," Prime Minister Johanna Sigurdardottir told state television as partial results were issued which she said made it fairly clear the "no" side had won.
With around 85,000 votes in the referendum counted, official figures showed 58 percent had voted against the accord compared with 42 percent in favor, the television said. Iceland has 230,000 voters but the turnout was not immediately available.
The prime minister, who had predicted a no vote would cause economic uncertainty for at least a year or two, did not say whether the government planned to resign.
"We must do all we can to prevent political and economic chaos as a result of this outcome," she said.
The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online "Icesave" accounts owned by Landsbanki, one of three Icelandic banks that collapsed in late 2008.
Icelandic lawmakers in February backed the repayment plan agreed with creditors in December but the president refused to sign the bill, triggering the vote. In March 2010, Iceland rejected an earlier Icesave repayment blueprint in a referendum.
The dispute over repayment has soured relations between the small North Atlantic island nation and the two other countries.
It may now be solved in a European court rather than in bilateral negotiations -- a solution that may take several years and that some economists say would be much costlier.
"It is clear that we have reached the end of the negotiation road," Finance Minister Steingrimur Sigfusson told state television.
Sigurdardottir said Iceland would now defend its case before the court of the European trade body overseeing Iceland's cooperation with the EU, the EFTA Surveillance Authority (ESA).
Economic Affairs Minister Arni Arnasson told the television he would be in touch next week with ESA, which said last year, in a first stage in legal proceedings that may end up in court, that Iceland should pay compensation to Icesave depositors.
Policymakers and economists have said solving the Icesave issue would help Iceland, whose economy went into deep recession after its bank crisis, get back into financial markets to fund itself. That is a condition for it to remove controls on capital flows it imposed in 2008 to stabilize a tumbling currency.
The controls have left an estimated 465 billion crowns ($4.10 billion), equivalent to a quarter of Iceland's gross domestic product, in the hands of foreign investors, many of whom are expected to want to pull out when controls are lifted.
Iceland last month outlined a cautious plan to gradually relax the capital controls, a process expected to take years. The main steps will take place only once Iceland has shown it can refinance loans in foreign credit markets.
(Editing by Philippa Fletcher)
