Brussels, Belgium - Eurozone finance ministers have said they are discussing ways to prevent financial fallout across the region after Greece refused to accept a proposal from its European partners on how to close its $268bn bailout programme.

The announcement, made by Eurogroup President Jeroen Dijsselbloem on Saturday night in Brussels, came after the Greek government surprised its partners in the early hours of the morning, by calling for a July 5 referendum on whether or not to accept the reform proposals presented by its creditors.

Greece must pay the International Monetary Fund $1.7bn by Tuesday or risk defaulting on its obligations.

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Athens now finds itself in the position where it will have no financial assistance programme in place after Tuesday night, as eurozone ministers also rejected a request to extend its bailout programme for one more month while a referendum takes place.

"The programme will expire on Tuesday night," said Jeroen Dijsselbloem, the president of the Eurogroup of finance ministers, as meetings continued in the Belgian capital.

He explained that ministers had not accepted a request from the Greek government to extend its bailout programme by one month and that all members of the euro area, except Greece, had underlined their regret of the decision to hold a referendum.

"We will immediately ... hold a second meeting to discuss the consequences from the conclusion just drawn and to prepare for whatever is needed to make sure that at all times the stability of the eurozone remains at its high level," Dijsselbloem said.

"We were negatively surprised by the steps that the Greek government took last night... The joint opinion of the other 18 members of the Eurogroup is that they very much regret this and regret the fact that last night’s talks were broken off, and that today no further negotiations were possible."

As finance ministers gathered in Brussels, there were already reports circulating that Greek citizens were queuing up outside ATMs out of fear that a failure to reach a deal would push Greece into a state of bankruptcy.

Ongoing talks cancelled

News of a referendum in Greece meant that representatives working for the European Commission, the EU's executive branch, the International Monetary Fund and European Central Bank had to cancel ongoing talks aimed at finding a compromise to the reforms required by Greece under its bailout programme.

An official, who spoke on the condition of anonymity as he is not permitted to speak publicly, said finance ministers would not be discussing ways to shelter Greece from any potential financial fallout, but rather how to prevent spillover in Europe's periphery in countries such as Portugal, Italy and Spain.


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Greek Finance Minister Yanis Varoufakis, who is not taking part in the ongoing talks inside the ministerial meeting, said the Eurogroup would live to regret its decision not to provide the country with a bailout extension.

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"The refusal of the Eurogroup today not to endorse the request for an extension...will certainly damage the credibility of the Eurogroup as a democratic union of partner member states," he said. "I am very much of the opinion that that damage will be permanent."

As he left the building in Brussels he said: "It is a sad day for Europe but we will overcome it".

French finance minister Michel Sapin told reporters after meetings concluded that Greece should not consider negotiations to be closed.

"I say this with force. France remains available so that at any moment dialogue can start again on the basis that we have wanted, that would allow for a global agreement," he said.

The European Central Bank now has a tricky decision on whether or not it continues to provide emergency liquidity to the Greek banking sector.

"The Governing Council of the ECB will hold a meeting in due course to discuss the situation," the ECB said in a statement. "The ECB is closely monitoring developments."

Source: Al Jazeera