Carrying banners calling for a "NO" vote in the forthcoming referendum on bailout conditions set by the country's creditors, protesters gather in front of the Greek parliament in Athens, on June 29, 2015.
Greece's Finance Minister Yanis Varoufakis said his country would not make the deadline today for a key payment to the International Monetary Fund.
Asked by journalists outside the ministry whether Greece would make the debt repayment of about 1.5 billion euros ($1.6 billion), he replied, "No".
A defiant Athens urged Greeks to reject creditors' demands for tough reforms in a weekend referendum, despite warnings that this would lead to a chaotic Greek exit from the eurozone.
Thousands took to Greece's streets on Monday night to support their government's opposition to the latest debt proposals after a clash with the country's creditors forced a shutdown of its banks and brought the country close to financial collapse.
Talks between Greece's left-wing government and its creditors -- the "troika" of the European Union, European Central Bank and International Monetary Fund -- fell apart last week after Prime Minister Alexis Tsipras said he would put the latest proposals to a referendum.
Tsipras sought to calm nerves on Monday by leaving the door open to talks, saying the July 5 plebiscite on creditors' latest cash-for-reform plans would leave the country "better armed" in the fight for a debt deal.
But the premier also made clear Greece would be unable to make the 1.5 billion euro payment to the IMF on Tuesday. "(How) is it possible the creditors are waiting for the IMF payment while our banks are being suffocated?" he said in a late-evening interview on ERT television.
EU leaders including Germany's Angela Merkel, France's Francois Hollande and Italy's Matteo Renzi, wrong-footed by Tspiras's shock announcement of the vote over the weekend, warned it would effectively be a vote on Greece's place in the euro.
On Monday, an emotional European Commission head Jean Claude Juncker bitterly criticised Tsipras, saying he felt "betrayed" by the leftist Syriza government's behaviour and adding it was time to tell voters "the truth".
"A 'No' would mean, regardless of the question posed, that Greece had said no to Europe," said Juncker, previously Tsipras's closest -- and sometimes only -- ally in five months of debt talks.
Mr Varoufakis hit back, telling British newspaper The Daily Telegraph Athens could seek legal action to stop the country being forced out of the eurozone.
Tsipras has called for Greeks to vote against the proposals and staked his own career on the outcome of the vote, saying he was not a prime minister who would stay in place "in all weathers".
In Greece, shocked locals formed huge queues at ATMs after banks were shut down, some waiting for hours to withdrawn the 60 euros ($66) they are allowed per day.
"I feel like I'm voting for sudden death or slow death," said 38-year-old office manager Maria in Athens, who wants Greece to stay in the EU. "It feels like it's game over."
But many Greeks backed the government's defiant stance against the country's creditors, who they blame for forcing the country into years of painful recession by demanding swingeing austerity cuts.
More than 17,000 people took to the streets in Athens and the country's second city of Thessaloniki to protest against the latest bailout proposals.
"Our lives do not belong to the creditors!" read banners held aloft by demonstrators in the capital.