Greek government on Tuesday held on to its anti-austerity platform even as European leaders pleaded with Greek voters to back the highly disputed bailout proposals in a crunch referendum or face leaving the euro.
Greece, which has received €240 billion of bailout cash since 2010, boasts a debt of nearly 180 per cent of GDP, on Sunday announced a closure of all its banks, leaving many scrambling to find cash.
Greek finance minister Yanis Varoufakis said on Tuesday that Greece will not pay IMF debt, the due date for repayment.
Prime Minister Alexis Tsipras, whose Syriza party came to power in January on an anti-austerity platform, has advised voters against backing a deal, which he said spelt further "humiliation" for Greece. At the same time, he had also pleaded for a bailout extension to keep Athens afloat.
Tsipras also left the door open to talks, saying the 5 July plebiscite on creditors' latest cash-for-reform plans would leave the country "better armed" in the fight for a debt deal.
But he made it clear that Greece was unable to make the €1.5-billion payment due to the International Monetary Fund on Tuesday, the same day its international bailout programme expires.
Failure to pay would see Greece become the first country, a wealthy one as well, to default on the IMF since Zimbabwe in 2001.
The country has already endured five years of recession, while unemployment has more than doubled from 10.3 per cent in 2009 to 25.6 per cent this year and pensions and benefits were roughly halved between 2010 and 2014.
Greece closed its banks and imposed capital controls on Sunday to check the growing strains on its crippled financial system, bringing the prospect of being forced out of the euro (See: Markets in a tailspin as Geek debt default looms).
EU chief Jean-Claude Juncker had on Monday bitterly criticised Tsipras, saying he felt "betrayed" by the leftist Syriza government's behaviour and that it was time to tell voters "the truth".
EU leaders, including Germany's Angela Merkel France's Francois Hollande and Italy's Matteo Renzi put up a united front, stressing that the bailout referendum was effectively a vote on Greece's place in the euro.
Global stock markets were sharply down Monday over fears of a Greek exit from the Euro zone.
In Europe, London's FTSE 100 fell 1.97 per cent, Frankfurt's DAX 30 lost 3.56 per cent and the CAC 40 in Paris shed 3.74 per cent.
In Lisbon, Portugal and Milan, Italy the stock markets plunged more than 5 per cent and Madrid, Spain down 4.56 per cent.