Grexit: Alexis Tsipras announces referendum on bailout deal for 5 July

Greek Prime Minister Alexis Tsipras has called a referendum on 5 July on whether his cash-strapped country should accept a bailout agreement offered by creditors.

But he was clearly not pleased by the deal's terms.

"These proposals, which clearly violate the European rules and the basic rights to work, equality and dignity show that 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," Tsipras said in a televised address to the nation. The people must decide free of any blackmail... the referendum will take place on 5 July.

Bones of Contention

The IMF is pushing for deeper spending cuts, not just more tax rises

The creditors want the Greek governmentto scrap special benefits paid to some low-income pensioners

Creditors also want a wider VAT base, but Greece says it will not allow extra VAT on medicines or electricity bills, and has also resisted calls for VAT hikes on hotels and restaurants

Athens wants a concrete commitment to debt relief, something its creditors are not offering

"The Greek people are sovereign to decide," Tsipras said. "With national unity and composure we will take the decisions that we deserve.

"Greeks, with this blackmail to accept an austere and humiliating austerity programme which has no end and no prospect of getting back on our feet, I call upon you to decide patriotically and proudly as dictated by the proud history of Greeks."

Greece has to do a deal with its creditors by 30 June or face default on a €1.6bn (£1.13bn, $1.8bn) loan to the IMF. Without an agreement or an extension the country will be in default on a series of additional debt payments.

Athens has to reach a cash-for-reform agreement with the IMF, the European Central Bank and European Commission before it can unlock €7.2bn in badly needed funds. Greece has already said it cannot pay back the €1.6bn it owes the IMF by the 30 June deadline.

He made the comments hours after flying back from Brussels, where European and IMF creditors offered Greece a deal that his government rejected as inadequate.

Athens will ask for an extension of its bailout agreement, which ends on 30 June, by a few days because the government had called a referendum, he said.

Tsipras spoke with European Central Bank chief Mario Draghi on 27 June. A government spokesman said Draghishowed "understanding and sensitivity" over the referendum decision.

Greek banks rely on emergency infusions from the ECB to stay afloat as savers pulled out money on fears of capital controls.

"We are sure - which was proven also during the phone call - that Draghi has the best of intentions on the decision of the Greek government to hold a referendum," Gabriel Sakellaridis told Greek television.

German Chancellor Angela Merkel had urged urged Athens to accept what she called an "extraordinarily generous" offer.

But Panagiotis Lafazanis, the leader of the radical left-wing group in Tsipras's governing Syriza party, announced he and his faction would not support a "yes" vote.

Meanwhile, opposition leader Antonis Samaras attacked Tsipras over the referendum, saying it effectively put Greece on a collision course with Europe.

"European identity is an accomplishment of Greece, and [the] New Democracy [party] is clearly sided with democracy and Europe," he said in a statement.