The Greek parliament has backed plans for a referendum on international creditors’ terms for a new bailout.The 5 July referendum was called by PM Alexis Tsipras, who opposes further budget cuts. He urged voters to deliver a “resounding ‘no'” to the package.
Eurozone partners have criticised Greece’s referendum announcement, and rejected its request to extend the bailout programme beyond 30 June.
Greece could default on a €1.6bn (£1.1bn) IMF repayment due on that day.
There are fears the country may leave the euro and that its economy may collapse without new bailout funds.
Mr Tsipras’s motion on a referendum easily won the backing in the 300-member strong parliament, with at least 179 MPs voting “yes” in the early hours of Sunday.
Speaking just before the vote, Mr Tsipras described the creditors’ proposal as “an insulting ultimatum” and said an emphatic “no” vote on 5 July would strengthen Greece’s negotiating position.
His government had earlier rejected the creditors’ offer of a five-month extension to Greece’s bailout programme in exchange for reforms.
On Saturday, eurozone finance ministers rejected the Greek proposal for the bailout extension beyond Tuesday’s deadline. A Eurogroup statement said Greece had broken off negotiations over a new bailout deal “unilaterally”.
Analysis: Chris Morris, Brussels
It’s never over till it’s over. But it feels like the end is perilously close. The breakdown in talks between Greece and its creditors has to be seen as a failure.
It wasn’t supposed to happen like this. It is also a massive gamble on all sides, and a possible turning point in the history of the eurozone. There will still be those working feverishly behind the scenes for compromise, but in effect neither side has blinked yet.
When the Greek government thought it had made substantial concessions at the beginning of the week, the creditors said it simply wasn’t enough. And while no-one can say for certain that Greece will leave the eurozone, this is already uncharted territory.
Much will depend on the outcome of the referendum called by PM Alexis Tsipras, if it takes place on schedule. And much will also depend on the European Central Bank – and whether it believes it can still allow funds to flow, to prevent banks in Greece from collapsing.
ECB faces huge decision
Can Greece stay in the euro?
Crisis talks: As they happened
Eurogroup head Jeroen Dijsselbloem said it would now be up to the European Central Bank (ECB) to decide whether to continue providing emergency liquidity funding to the Greek banking system.
IMF head Christine Lagarde told the BBC that because the European part of Greece’s bailout programme would have expired by 5 July, any referendum would relate to “proposals and arrangements which are no longer valid”.
But she said that if there was a “resounding ‘yes'” to staying in the eurozone, then the response would be “a resounding ‘let us try'”.
Meanwhile, queues have formed in Greece outside banks in the past few days amid concerns that the central bank might start restricting withdrawals.
Greece timeline: Key dates ahead
- 27 June: Eurogroup refuses Greek request to extend existing bailout
- 30 June: Troika bailout programme ends as Greek €1.6bn payment to IMF due
- 1 July: No bailout programme could mean no emergency liquidity from the ECB
- 5 July: Proposed Greek referendum
- 10 July: Treasury bills worth €2bn to be repaid
- 20 July: Bonds worth €3.5bn to be repaid to eurozone partners
- 20 August: Bonds worth €3.2bn to be repaid