A last-ditch bid by Athens to extend Greece's bail-out failed as the country was poised to default on its £1.1 billion IMF loan, placing its economy on the edge of collapse and possible exit from the eurozone.
Finance ministers rejected the unexpected request for a third bail-out, amounting to £21 billion, from Alexis Tsipras, the Greek Prime Minister, which some saw as a bid to strengthen his position domestically ahead of Sunday's referendum.
As stock markets tumbled again, long queues continued to snake from many cash machines, where withdrawals have been capped at just £40 a day.
After rejecting a slightly amended offer from the European Commission late on Monday night, the Syriza Government made a request for a two-year deal under the European Stability Mechanism(ESM), the bail-out mechanism for eurozone countries whose aim is to maintain the stability of the euro.
The ESM did not exist when Greece was bailed out in 2010 and 2012.
A statement from Athens said: "The Greek government today proposed a two-year agreement with the ESM to fully cover its financing needs and the simultaneous restructuring of debt."
During a teleconference eurozone finance ministers discussed the offer but rejected it.
Alexander Stubb, Finland's finance minister,tweeted: "Extension of program or haircut not possible...request for ESM-program is always dealt with through normal procedures."
An EU official confirmed that Greece's creditors did not agree on a new bail-out deal or extension for Greece and would instead, starting today, focus on a new plan for the embattled country.
The official said: "Clearly, no agreement tonight. They will reconvene tomorrow to discuss a follow-up agreement."
Jeroen Dijsselbloem, the eurozone's top official, added that "it would be crazy to extend" the Greek bail-out beyond its midnight expiration since Greece would not accept the European proposals on the table.
Earlier, Chancellor Angela Merkel told German MPs that the eurozone's wealthiest member would not enter into any new aid negotiations with Greece before the weekend referendum.
"Before a referendum, as planned, is carried out, we won't negotiate on anything new at all," she insisted.
Mr Tsipras has urged his country to vote against the austerity proposals this weekend but EU leaders have warned that any rejection would mean Greece leaving the eurozone.
Earlier, Greece confirmed that it would default on its IMF loan payment today despite the fact that senior figures in Athens continued to hope for a "zero-hour" agreement to extend its bailout beyond the midnight deadline to keep the country afloat.
Thousands of people gathered in Athens' main Syntagma Square outside the Parliament to demonstrate in favour of a Yes vote in Sunday's referendum.
Greeks have been called on to vote on whether to accept budget savings that creditors have proposed in exchange for loans. The left-wing Government has called for a No vote.
Police said up to 12,000 people were at last night's demonstration, whose main slogan was "We're staying in Europe," before a thunderstorm broke. Many stayed despite the rain.
The protest cames the day after a similar demonstration with about 13,000 government supporters advocating a No vote.
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