Greek citizens will get to vote on whether to accept the terms of a new bailout proposal.
Prime Minister Alexis Tsipras announced the news on national television late Friday. The referendum will take place on July 5.
Tsipras urged the Greek people to vote against the new proposal from Europe and the International Monetary Fund. He said he believes it is unacceptable and will lead to further austerity.
The Greek government has been negotiating with its creditors over the terms of the bailout agreement for four months.
Europe promised Greece more bailout loans in return for an acceptable program of economic reform. But Greece still appears unwilling to spend less on pensions, raise more money from sales taxes, and scale back a planned tax increases on business. It also wants any deal to include ways to relieve the burden of its enormous debt — even lower interest rates and longer repayment schedules.
The stakes are high. Tuesday is the deadline for the Greek government to repay the International Monetary Fund 1.5 billion euros. If it misses the payment, Greece may have to introduce capital controls to prevent a run on its banks. It would then risk slipping out of the eurozone.
While Tsipras disapproves of the new bailout plan, he said he would respect the way the public votes on July 5.
— CNN’s Elinda Labropoulou contributed to this report.