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Greece's Prime Minister Alexis Tsipras has confirmed again that his country would hold a referendum on Sunday on the terms of its bailout after a deal offered by Athens to creditors was rejected by Germany.

The country defaulted on an IMF payment late on Tuesday (22:00GMT) that cut off Athens from vital bailout financing.

Uncertainty ahead as cash flow dries up for Greeks

In a televised address to the nation, he urged Greeks to vote "No" to the austerity measures demanded by creditors in order to win a better deal, saying that the vote was not about staying in the eurozone.

Earlier, in a letter sent to the heads of the European Commission, International Monetary Fund (IMF), and European Central Bank, Tsipras said that Athens could accept their bailout offer if some conditions were changed.

However, Germany said it could not negotiate while Greece was headed for a referendum on the aid-for-reforms deal.

In exchange for the conditional acceptance, the leftist leader asked for a 29 billion euro ($32bn) loan to cover all its debt service payments due in the next two years. The conditions relate to pensions reform, sales taxes, and reduced military spending.

Tsipras said in his public address that Greece would continue to negotiate with its international creditors, and insisted that Athens wanted to stay in the eurozone.

German Chancellor Angela Merkel effectively ruled out all negotiations, saying that Europe could "calmly" await the outcome of a referendum called by Tsipras for Sunday on bailout terms.

"The world is watching us. But the future of Europe is not at stake," Merkel told Germany's Bundestag lower house of parliament, firmly defending her record on handling five years of crisis in Greece.

Chaos 

With queues forming at many cash machines a day after Greece became the first advanced economy to default on the IMF.

The Greek government has allowed elderly residents without bank cards to withdraw $134 from their accounts, leading to often chaotic scenes on Wednesday.

The IMF cannot lend money to a country that is in arrears, according to the international organisation's regulations.

Analysis: What will a referendum mean for Greece?

Greek officials had indicated they would be willing to suspend a referendum planned for Sunday on the reforms demanded by creditors if Wednesday's talks produced on the new funding request. 

European officials and Greek opposition parties have been adamant that a "No" vote on Sunday will mean Greece will leave the euro and possibly even the EU.

Al Jazeera's Barnaby Phillips, reporting from Athens, said many pro-EU protesters put the blame for Greece's predicament on Tsipras.

"They say he's playing a dangerous position and putting his party's interests above his country," Phillips said.

Greece has debt worth nearly 180 percent of its GDP after receiving two bailouts worth $266bn since 2010.

Unemployment has more than doubled since 2009 to 25.6 percent and pensions and benefits have roughly halved between 2010 and 2014.

Source: Al Jazeera And Agencies