Debt deal referendum called to avoid gov't collapse: Greek minister

The referendum on the debt draft deal with creditors that will be held on Sunday was called to avoid early general elections just a few months after the January national polls, a Greek minister said on Friday, as the country's top administrative court was expected to announce a verdict on the referendum's legality.

"If we had tabled the proposal for a debt agreement to parliament, the government would fall," Euclid Tsakalotos, deputy foreign minister and chief coordinator of Greece's negotiation group, told a local television channel.

The Greek minister admitted that after five months of tough negotiations with lenders on the next set of fiscal adjustment policies and reforms Greece should implement in exchange of reforms, even the milder version for a deal the Greek government proposes was far away from the initial policy program of the Leftist government.

The draft agreement would most likely not pass the assembly forcing new elections within three weeks, under the Constitution, Tsakalotos said, responding to criticism over the referendum initiative that further fuelled concern over an imminent financial meltdown and possible Grexit.

After Greek Prime Minister Alexis Tsipras' televised address in the early hours of Saturday, when he announced the July 5 referendum, urging voters to say NO as a means of pressure to the other side for an agreement on better terms, a string of dramatic developments has been unwrapping.

With European Central Bank freezing the emergency liquidity aid to Greece's banking sector, Greek banks are shut since Monday, capital controls have been imposed and Greeks line up for hours in front of ATMs to get 60 euros per day per bank account.

From Wednesday, Greece is the first advanced economy in arrears to International Monetary Fund as its second bailout expired.

As Greek voters are almost evenly divided between YES and NO, according to the opinion surveys, the Council of State, or Greece's highest administrative court, was examining on Friday the appeal two citizens filled earlier in the week against the conduction of the referendum.

Questioning its legality, they asked that it be withdrawn.

According to the argument, it is unconstitutional because Greece's Constitution clearly does not allow referendums on fiscal matters and illegal because the short notice does not allow citizens to be fully informed on the consequences of their choices and the terms on the ballot are not very clear to all.

A ruling was expected later on Friday, as Tsipras was to make a new televised address, according to government sources and deliver a speech in a rally of the NO camp in front of the parliament on Friday evening. Another rally of the YES camp was scheduled for the same time nearby in central Athens.

In an interview with a local television channel on Thursday evening, the Greek premier assured that irrespective of the referendum outcome a deal with lenders will be signed within 48 hours and banks will reopen.

However, European officials on Friday rejected his optimism and many Greeks were worried that with no deal and cash reserves running out as approximately 400 million euros are withdrawn every day, banks will not reopen soon and daily life will become more difficult for people. Endit