Greek parliament approves referendum on bailout deal

Greece's parliament has voted in favour of Prime Minister Alexis Tsipras' motion to hold a referendum on the country's creditor proposals for reforms in exchange for loans. Tsipras and his coalition government have urged people to vote against the deal, throwing into question the country's financial future.

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The vote is to be held next Sunday, July5. It has raised the question of whether Greece can remain in Europe's joint currency, the euro. Many Greeks alarmed by the announcement for the referendum early Saturday morning formed queues at ATMs, putting a further strain on banking deposits.

Speaking in parliament, Tsipras said the reforms proposed by Greece's creditor institutions the International Monetary Fund, European Central Bank and European Commission, were an ultimatum and an insult.

"We exhausted every limit of concessions so there could be an agreement," Tsipras said. "Perhaps some saw that as a weakness.

"This no will also be a big yes, a big yes to the decision of the Greek government to reject an ultimatum that insults the Greek people."

Greece's place in the euro currency bloc looked increasingly shaky on Saturday after eurozone nations rejected a month-long extension to its bailout program and the prime minister called for a risky popular vote on the country's financial future.

Situation 'regretful', says eurozone official

Tsipras shocked Greece's creditors late Friday when he called for thereferendum. The country's bailout program ends Tuesday. Without an extension or more loans from creditors, Greece is likely to be in arrears on a debt payment Tuesday and its banks face the risk of collapse.

The Greek government's call on the people to vote against a proposed bailout deal from international creditors on July 5 angered many of its eurozone partners.

"We must conclude that, however regretful, that the program will expire on Tuesday night. That is the latest date that we could have reached an agreement," said Jeroen Dijsselbloem, the top eurozone official.

"The Greek authorities have asked for a month extension. But in that month there can be no disbursements," he said. "How does the Greek government think that it will survive and deal with its problems in that period? I do not know," Dijsselbloem said.

The governing council of the European Central Banks, which is keeping Greek banks propped up, said it would hold a meeting "in due course" on the situation and said it was "closely monitoring developments."

Greek Finance Minister Yanis Varoufakis insisted that Athens and lenders still had time to improve the deal and avoid a negative outcome to the referendum.

"There is no reason why we can't have a deal by Tuesday. If the deal is acceptable we will recommend a positive vote," he said.

"It's a sad day for Europe but we will overcome it," Varourfakis said upon leaving while his counterparts continued talks.

The sides are haggling over the reforms the country needs to make in exchange for more financial aid but have managed to only increase uncertainty over the country's future.

Greek people could rejectgovernment advice

The referendum will ask Greeks to vote on a proposal of reforms that the country's creditors made on Thursday. The Greek government rejected it as imposing cuts that are too harsh on the general population.

The Greek government said it would recommend Greeks vote "no" in the referendum, but Varoufakis was far from certain the voters would agree. He spoke of "the high possibility that the Greek people will vote against the advice of the Greek government."

If it became accepted among European politicians that Greece could not agree on a rescue deal, the European Central Bankcould decide to end the emergency credit that it allows Greek banks to draw on. The banks would likely collapse and the Greek government would have to support them itself. Penniless, the government would have to revert to printing a new currency, effectively drawing the country out of the euro union.

Experts predict long, deep recession

Such a move would put the country through a new era of economic pain. With the new currency less valuable than the euro, the government would have to write off a chunk of its foreign loans mainly owed to eurozone countries and many companies and households would go bankrupt. Experts predict a long and deep recession in a country that has already been through five years economic depression.

The uncertainties of all this would roil European and global markets, though experts are divided on the extent. Some say Europe is better equipped to handle a Greek euro exit, but others say it is unclear what might happen. The euro dropped in value slightly on international markets after the referendum was called.