Alexis Tsipras said a clear vote against austerity would help Greece negotiate a better settlement to the crisis.
Otherwise, the prime minister warned, he would not stay in office to oversee more cuts.
Greece’s bailout expires on June 30, the same day it faces a deadline to repay a €1.6 billion loan to the International Monetary Fund (IMF).
The loan is to be repaid by 18:00 Washington time (22:00 GMT).
EU leaders have warned that a rejection of the creditors’ proposals on July 5 would mean Greece leaving the eurozone – though Alexis Tsipras says he does not want this to happen.
Talks between Greece and its creditors broke down last week, leading to Greek banks having to shut this week. The uncertainty also caused stock markets to fall sharply on June 29.
Asian markets rebounded on June 30, with stock markets in Tokyo, Hong Kong and Seoul all rising compared with June 29.
Tens of thousands of people gathered outside the Greek parliament in Athens on Monday evening in a show of support for the government’s proposals. A rival protest organized by those calling for a “Yes” vote is due later on Tuesday, June 30.
Speaking live on state TV on Monday evening, PM Alexis Tsipras appealed to Greeks to reject the creditors’ proposals, saying this would give Greece “more powerful weapons” to take to the negotiating table.
“We ask you to reject it with all the might of your soul, with the greatest margin possible,” he said.
Alexis Tsipras told viewers he did not believe the creditors wanted Greece out of the eurozone “because the cost is immense”.
He also hinted strongly that he would resign if the result of the referendum was a “Yes” vote.
“If the Greek people want to proceed with austerity plans in perpetuity, which will leave us unable to lift our head… we will respect it, but we will not be the ones to carry it out,” Alexis Tsipras said.
The Greek government has already been forced to order all banks to be closed until July 6 after the European Central Bank (ECB) decided not to extend its emergency funding.
The ECB is believed to have disbursed virtually all of its ceiling for funds, amounting to €89 billion.
Long queues of people were seen snaking outside ATMs on June 29, with withdrawals capped at just €60 a day.
Elderly people, many without bank cards, were seen waiting outside closed bank branches in the hope of getting access to funds.
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