Greece is poised to leave the eurozone and default on its €1.6 billion loan repayment after eurogroup finance ministers yesterday rejected its request for a temporary extension of the bailout programme.

The rejection came in the wake of a surprise Greek government decision late on Friday night to hold a referendum on July 5 – almost a week after Tuesday’s repayment deadline – on the conditions of a bailout package proposed by the EU.

Prime Minister Joseph Muscat described Greece’s decision to hold the referendum after the deadline imposed by the International Monetary Fund as “irresponsible”.

“It was Greece’s right to hold a referendum but it was irresponsible to announce this so late in the day and have the vote take place after the IMF deadline,” Dr Muscat said.

Greece has to pay back the IMF €1.6 billion on Tuesday but is unlikely to find the cash to do so.

The developments have sparked a run on Greek banks as people queued at cash machine yesterday to withdraw cash.

Fears have grown that a crash in the Greek banking system could lead to problems in other countries exposed to Greece, especially Cyprus, Bulgaria and Serbia.

Dr Muscat yesterday said there was no fear of contagion in Malta. “I have spoken to the Central Bank Governor and he has reconfirmed that Maltese banks are not exposed to Greece and so there is nothing to worry about.”

He said Malta would insist that money it is owed by Greece be paid back in full even if the Hellenic Republic exits the euro.

“If the Greek people choose to reject the bailout conditions and as a consequence the euro, Greece would still have to take recourse to international markets and when it does so Malta will be at the forefront along with its eurozone partners to demand its money back.”

Malta has loaned Greece some €177 million as part of two European bailout packages since 2010.

Eurozone finance ministers yesterday held a three-hour meeting that ended in stalemate as talks were frozen pending the referendum result.

Greece set for default

The meeting then continued without the Greek finance minister as emergency measures to mitigate the fallout of a banking crash in Greece were discussed.

Finance Minister Edward Scicluna told The Sunday Times of Malta the Greek Finance Minister did not even tell his counterparts what the referendum question would be. “Nor would he say whether the Greek government was going to campaign in favour or against the bailout package,” he said.