Greece on the Edge: Bailout Extension Rejected, But Referendum Still On

Update:

The Eurogroup has refused to extend Greece's current bailout deal, which is set to expire on June 30, days before a referendum is set to take place on the financial aid package currently being negotiated.

Greek Prime Minister Alexis Tsipras reportedly called European leaders, including German Chancellor Angela Merkel and French President Francois Hollande on Saturday to tell them, "Democracy is of the highest order in Greece and the referendum will take place regardless of the Euro group decision."

In a press conference on Saturday, Greek finance minister Yanis Varoufakis said that a deal between Greece and its creditors could still be reached before Tuesday's expiration date. But he slammed the Eurogroup for rejecting Greece's request to extend the current bailout to give the country enough time to put the proposed deal to a popular vote.

"The refusal of the eurogroup today to endorse our request for an extension of this agreement for a few days, a couple of weeks, to allow the Greek people to vote on their proposals - even when there is a very high probability that Greeks will go against our recommendation and vote yes - will certainly damage the credibility of the eurogroup as a democratic union of partner member state," Varoufakis said. "I'm very much afraid that damage will be permanent."

This story is developing. Follow the Guardian's live updates here.

Earlier:

Greek Prime Minister Alexis Tsipras this week called for a referendum on the financial aid deal that is currently at a standstill in negotiations, putting the future of the bailout package to a popular vote at the last minute as he rejected another austerity-heavy plan from creditors.

Greeks will now be asked to vote on whether to accept or reject the deal put forth by the Troika--the European Union, the European Central Bank, and the International Monetary Fund. The Syriza cabinet will meet Saturday to get the vote in line with the Greek constitution.

In a televised national address late Thursday night, Tsipras slammed the deal put forward by the Troika as "blackmail," saying the terms "clearly violate European social rules and fundamental rights." But he added that he would respect the outcome of the referendum.

The announcement followed an emergency meeting of his cabinet in Athens. Syriza officials emerged from the meeting saying they were confident Greeks would vote no on the "barbaric measures" of the deal, which include massive tax hikes and punishing cuts to social benefits--conditions which the Troika set in order to release bailout funds and which Tsipras had rejected over and over during high-stakes talks in Brussels.

"After five months of hard negotiations, our partners, unfortunately, ended up making a proposal that was an ultimatum towards Greek democracy and the Greek people, an ultimatum at odds with the founding principles and values of Europe, the values of our common European construction," Tsipras said in a national address late Thursday night.

Tsipras said Greece now faces a "historic decision" to respond to the deal by popular vote, adding that he had asked leaders of France, Germany, and the European Central Bank to extend their current bailout by a few days "so this democratic process could take place."

"These proposals, which clearly violate the European rules and the basic rights to work, equality and dignity, show the purpose of some of the partners and institutions was not a viable agreement for all parties, but possibly the humiliation of an entire people," he said during his address.

"The question is not whether we will remain in the eurozone," said government spokesperson Gavriel Sakellarides. "The Greek people should not be afraid."

The Guardian's correspondent in Greece, Helena Smith, elaborates:

The recipient of EUR240bn in bailout funds - the biggest rescue program in global financial history - Greece has seen its economy contract by more than a quarter, unemployment soar and poverty levels rise precipitously under the weight of draconian budget cuts and tax increased demanded by creditors.
"It is a democratic decision and the Greek people are being called to give a democratic answer. And that answer is going to be a resounding no," Lafazanis told Kontra TV.
"If the Greek people say a big no, it is going to be impossible for those who wield power not to take note unless democracy no longer exists."
Echoing that sentiment, the Greek finance minister, Yanis Varoufakis, tweeted: "Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)."