0503 GMT August 18, 2019
Prime Minister Alexis Tsipras announced the July 5 referendum in a televised address to the nation, following an emergency meeting of his cabinet, AP reported.
"The Greek government has been asked to accept a proposal that places new unbearable burdens on the Greek people," Tsipras said. "Right now, we bear an historic responsibility concerning, the future of our country. And this responsibility obliges us to answer the bailout creditors' ultimatum based on the sovereign will of the Greek people."
The move radically raises the stakes in Greece's confrontation with its increasingly irate creditors, whom Tsipras accused of seeking to ‘humiliate the country’, demanding new pension cuts, sales tax hikes and labor market reforms.
Worried Greeks have been pulling their money out of banks for months, and an estimated €4 billion left Greek banks last week. Queues were seen forming outside several Athens cash machines and fuel stations late Friday and early Saturday.
Giorgos Pistevos, a retired bank employee, was in a queue withdrawing money in the northern suburb Vrilissia, where many cash machines had 5 to 25 people waiting.
"I withdrew the (daily) limit, €700, and then I went for a second try, but it won't give me any more," he told The Associated Press. "I'll try again."
Pistevos said he went home after midnight and switched on the TV. "As soon as I saw the news, I went straight to the bank because we don't know what will happen," he said.
Tsipras said he would ask creditors for an extension “of a few days” to Greece's bailout program, which expires on Tuesday. In theory, without an extension, the country will lose access to any remaining bailout funds.
The referendum announcement also raises severe questions over whether the debt-crippled country will be able to remain solvent and in the 19-state eurozone. Greece desperately needs a deal with its creditors. Without a €7.2 billion ($8.07 billion) bailout loan installment — which would only be available if there is a deal — the country will be unable to make a €1.55 billion payment to the International Monetary Fund on Tuesday, and even bigger payments later July.
A Greek official close to the bailout negotiations said the country was unlikely to pay the IMF on Tuesday, adding that IMF rules allow a certain period during which a country is considered to be in arrears.
By essentially defaulting on its debt mountain, Greece would likely see its banks collapse, as they depend on emergency European Central Bank funding. The government could soon run out of cash, face huge difficulties in paying pensions and civil servant salaries — and that could force it to leave the eurozone and adopt a weak national currency. But the country imports most key consumer goods, whose cost would rocket beyond most Greeks' reach under a new currency.
Teneo Intelligence analyst Wolfgango Piccoli said Tsipras' move places Greece in ‘entirely uncharted waters’. In a note, he said it also raises the risk of the country leaving the euro to "at least 50 percent," more than double the previous level.
Greek opposition parties — except for the Nazi-inspired Golden Dawn — expressed horror at the referendum.
Conservative main opposition leader Antonis Samaras accused Tsipras' radical left government of advocating an exit from the eurozone and the European Union.
" Tsipras has led the country to an absolute impasse," he said. "Between an unacceptable agreement and leaving Europe".
But government officials insisted that the referendum would not be about currency change.