The president of Iceland has urged Gordon Brown, UK prime minister, to take personal responsibility for settling the dispute over €3.9bn lost by British and Dutch savers in the Icesave bank after Icelandic voters overwhelmingly rejected a deal to repay the money.

Olafur Ragnar Grimsson, whose decision to block the repayment plan triggered Saturday’s referendum, told the Financial Times it was “high time” for Mr Brown to “take the matter into his own hands” after more than a year of wrangling.

More than 93 per cent of voters said no to a repayment deal that critics said would punish taxpayers for the mistakes of bankers and regulators, and pile more debt on a country of 320,000 people struggling to rebuild its shattered economy. Only 1.8 per cent voted in favour.

Reykjavik said it remained committed to repaying the money and planned to seek a fresh deal with Britain and the Netherlands involving lower interest costs. But Mr Grimsson made clear that any deal must command broad bipartisan support.

“[The referendum] demonstrates to the British and Dutch governments that there is a democratic limit to how far you can pressure ordinary people to shoulder through their taxes the financial failures of bankers,” he said.

On Sunday the British government said it was determined to recover all the money it paid to British depositors who lost money in Icesave. But Alistair Darling, chancellor, signalled that London was willing to compromise.

“We are prepared to be flexible, because it’s not in our interest to have Iceland excluded,” Mr Darling told the BBC. “We want Iceland to be part of mainstream Europe, and this is just part of that process.”

He conceded that it would take “many, many years” to recover the money. “You couldn’t just go to a small country like Iceland with a population I think about the size of Wolverhampton and say repay all that money immediately,” he said. “We’ve tried to be reasonable.”

Treasury officials said there was a “recognition” that the money needed to be repaid in spite of the overwhelming “No” vote. Talks about a fresh deal had been taking place for several weeks, they said.

A Treasury spokesman said: “The UK remains committed to reaching a final agreement with Iceland in due course. The result of the referendum is a matter for Iceland.”

Recent attempts by Britain and the Netherlands to soften the repayment terms, described by UK negotiators as “extremely generous”, have been rejected by the Icelandic government.

Mr Grimsson, whose popularity has soared since his intervention in January, called on Mr Brown to “step forward and show the same statesmanship on this issue as he did on the global financial system a year ago”. He said: “It is not good enough to be a statesman on the global scene and be a bully to Iceland.”

It would be a mistake for Britain and the Netherlands to alienate Iceland, which was poised for a central role in the battle for access to Arctic trade routes and energy resources, he added.

Iceland applied to join the European Union last year but the Icesave dispute has undermined public support for accession. Mr Grimsson said China and others were interested in Iceland as a potential Arctic trade hub.

Dominique Strauss-Kahn, director of the International Monetary Fund, told Bloomberg that further loans for Iceland were not conditional on resolution of the Icesave dispute. But Maxime Verhagen, Dutch foreign minister, said Icesave would be “part of our considerations” of whether to back Reykjavik’s bid to join the EU.

Steingrimur Sigfusson, Iceland’s finance minister, said he hoped the dispute could be resolved before forthcoming elections in Britain and the Netherlands that could complicate negotiations.

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