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Greek Parliament Approves Referendum On Bailout; Crisis Peaks After Talks Fail

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The Greek Parliament early Sunday approved a referendum to be held on July 5 on the bailout terms demanded by a consortium of international creditors, with about 179 members voting in its favor.

The move was heavily criticized by eurozone members while rejecting Athens request to extend the deadline beyond June 30. The group refused Greek Prime Minister Alexis Tsipras' request to extend the deadline at least until the referendum on July 5 to avoid a default.

The Greek financial crisis intensified after talks on Saturday failed to yield any tangible agreement, with Eurogroup President Jeroen Dijsselbloem affirming the program for providing Athens with emergency funds would expire on Tuesday.

The Eurogroup in a statement confirmed Greece had broken off negotiations for a new bailout agreement "unilaterally."

"However regretful, the program will expire on Tuesday night. That is the latest date we could have reached an agreement," Dijsselbloem said at a press conference late Saturday.

With the EU stand resolute, it is now very likely Athens will default on a key payment due to the International Monetary Fund on Tuesday.

After walking out of the negotiations, Greek Prime Minister Alexis Tsipras obfuscated matters with the announcement of a referendum on July 5 over the bailout deal offered by the consortium of international creditors.

Earlier, Athens rejected the offer of a five-month extension to its bailout program in exchange for reforms. Tsipras termed the counter-proposal made by creditors as an "insulting ultimatum."

It is not clear what the Greek prime minister intends to achieve in a referendum after the expiry of the bailout deadline, although could get legitimacy for the failed negotiations.

Immediately thereafter, Tsipras called an emergency session of the Greek parliament where a majority of the house voted in favor of a referendum on the bailout terms to be held on Sunday, July 5.

The Greek parliament backed Tsipras move for a referendum on its creditors terms for a bailout which was approved with the government getting the requisite 151 votes majority quite easily, with at least 179 members voting in its favor.

According to news reports, finance ministers of 18 eurozone countries met at an emergency meeting in Brussels on Saturday, excluding Greece for the first time since the crisis began in 2010. The meeting is reported to have devoted time to planning an eventuality of eurozone without Greece, and protect the group from any impact of the financial turmoil thereafter.

Greece and its creditors have been holding a number of meetings in an attempt to break the deadlock over bailout funds. However, differences continued to crop up at every point which hampered any real progress towards an agreement.

The disagreement stemmed mainly with lenders insisting Greece hike taxes and cut pensions. Greece's creditors include the International Monetary Fund, the European Commission and the European Central Bank.

However, there was still a ray of hope when French Finance Minister Michel Sapin late Saturday indicated that talks could go on.

Greece is burdened with a EUR 1.5 billion payment to the IMF at the end of June. The country has indicated that it will not be able to make the payment without the bailout aid. Greece needs a deal with its creditors to unlock the EUR 7.2 billion aid to avoid bankruptcy.

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