Merkel "holds keys in her hand" to save Greece, Varoufakis says

In an interview to appear on Monday, Varoufakis said Greece would not put forth any new proposals in talks with its lenders, and that it was now up to the European Union, European Central Bank and International Monetary Fund (IMF) to compromise.

"The government leaders in the EU have to act," Varoufakis said. "And among them she, the representative of the most important country, holds the keys in her hands," he said, referring to Merkel. "I hope she uses them."

Germany is the biggest European contributor to the bailout programs that have kept Greece afloat for the past five years.

With the prospect of default looming if it cannot pay the IMF 1.6 billion euros by June 30, Greece's leftist government rejected creditors' final offer and instead called a referendum for July 5 on whether to accept the terms offered in order to unlock billions of euros in bailout funds.

"We couldn't accept that proposal but also couldn't simply reject it in view of the importance of the matter for the future of Greece," he said. "So we decided to turn to the citizens: to explain our negative position but to let them decide."

Varoufakis said the Greek government "remains open for new proposals from the institutions" and those could be included in the referendum question if they were "significantly better" than what was on the table.

When asked if he expected there to be a run on Greece's banks, or the introduction of capital controls, if there was no agreement, Varoufakis said:

"If Europe allows such a terrible thing to happen -- just to humiliate our government -- then Europeans will have to ask themselves the same question that Italy's head of government asked in view of the spectacular failure on the refugees issue: 'Do we want this kind of Europe?'."

(Reporting by Erik Kirschbaum; Editing by Kevin Liffey)