By Lefteris Papadimas and Renee Maltezou
ATHENS/BRUSSELS (Reuters) - Greek Prime Minister Alexis Tsipras called a referendum on bailout demands from foreign creditors on Saturday, rejecting an "ultimatum" from lenders and putting a deal that could determine Greece's future in Europe to a risky popular vote.
After a week of acrimonious talks in Brussels, where Tsipras dismissed proposals from the lenders as "blackmail", the 40-year-old prime minister said parliament would meet on Saturday to approve holding a referendum on July 5.
"Our responsibility is for the future of our country. This responsibility obliges us to respond to the ultimatum through the sovereign will of the Greek people," Tsipras said in a televised address in the early hours of Saturday.
The call marked the most dramatic twist yet in long-running negotiations between Greece and its lenders that have left the cash-strapped nation to the threshold of a bankruptcy and put the country's future in the euro in doubt.
Tsipras said the creditors' proposals "clearly violate European social rules and fundamental rights" and would asphyxiate Greece's flailing economy.
The euro zone had offered to release billions in frozen aid if Greece accepted and implemented pension and tax reforms that are anathema to its leftist government, elected in January on a promise to end austerity.
Without the bailout funds, Athens is set to default on 1.6 billion euros in repayments to the International Monetary Fund on Tuesday, pushing Greece closer to being forced out of the euro, causing chaos for its economy and financial markets. Tsipras said he would ask for an extension of the bailout ending June 30 by a few days to accommodate the referendum.
Soon after the televised address in the early hours of the morning, lines of up to 10 people were seen forming to withdraw cash from automated teller machines in at least three different parts of Athens. Small groups of anti-establishment protesters threw petrol bombs and stones at police in a central Athens neighborhood where protests are common.
Tsipras spoke with European Central Bank President Mario Draghi to discuss the referendum, and senior government officials were due to meet the ECB chief later on Saturday.
With Greece's stricken banking sector dependent on central bank funds to remain afloat, the ECB will play a vital role in keeping the system on its feet over the next few days.
But despite fears of a surge in deposit outflows from banks, a deputy minister said there were no plans to impose capital controls and banks would open as normal on Monday.
"NOT OVERLY OPTIMISTIC"
Tsipras said the creditor demands appeared to be aimed at the "humiliation" of Greece, and ministers called on voters to reject the package but opposition parties attacked the government.
"Tsipras brought the country to a total deadlock. Between an unacceptable agreement and a euro exit," former conservative Prime Minister Antonis Samaras said. The referendum question was effectively a "yes" or "no" to Europe, he said.
German Chancellor Angela Merkel and French President Francois Hollande had earlier met Tsipras on the sidelines of an EU summit to coax him to accept an offer to fill Athens' empty coffers until November in return for painful reforms.
But after months of fruitless wrangling, the patience of European partners with the leftwing government in Athens had grown thin and officials had indicated that there was little more room to maneuver.
Merkel said she and Hollande had urged him in a 45-minute private meeting to accept the creditors' "generous" offer.
"We have taken a step toward Greece," she said. "Now it is up to the Greek side to take a similar step."
Both she and Hollande said Saturday's meeting of euro zone finance ministers would be the decisive moment for a deal since time was running out to secure German parliamentary approval in time to release funds needed to avert a Greek default.
The creditors laid out terms in a document handed to Greece on Thursday. It said Athens could have 15.5 billion euros in EU and IMF funding in four installments to see it through to the end of November, including 1.8 billion euros by Tuesday as soon as the Greek parliament approved the plan.
The total is barely more than what Greece needs to service its debts over the next six months and contains no new money. Further funding would require a third bailout program, which is politically impossible for the moment in Athens and Berlin.
The lenders also made a gesture toward Tsipras' demands for debt relief by offering to reaffirm a 2012 pledge to consider stretching out loan maturities, lowering interest rates and extending an interest payment moratorium on euro zone loans to Greece, a senior EU official said.
"PLAN B"
Finance ministers from the euro zone had been due to meet at 2 p.m. (8:00 a.m. EDT) on Saturday to hear whether Greece accepted a revised offer from the European Commission, the European Central Bank and the International Monetary Fund.
According to one European official, if Greece did not accept the proposals, the ministers were to hold a separate meeting to discuss a "Plan B" on preparing to limit the damage from a Greek default to Greek banks and other euro zone countries and markets
Merkel and Hollande have refused to talk publicly about a "Plan B", saying all their efforts are focused on getting an agreement to keep Greece in the euro zone. They are expected to speak to Tsipras again by telephone before Saturday's meeting.
Germany's member of the European Commission, Guenter Oettinger, said Greece had five days left to avoid an exit from the euro zone.
Euro zone finance ministers are divided over whether a default would necessarily lead to Athens leaving the 19-nation single currency area, which would undermine the principle that membership is irrevocable.
(Additional reporting by Matthias Sobolewski in Berlin, Juline Ponthus, Alastair Macdonald, Tom Koerkemeier, Barbara Lewis, Francesco Guarasco, Adrian Croft and Andreas Rinke in Brussels; George Georgiopoulos, Lefteris Karagiannopoulos in Athens; Writing by Paul Taylor and James Mackenzie; Editing by Sophie Walker, Philippa Fletcher, Toni Reinhold)
