The Greek government has said that it will hold a referendum on a new EU aid package, calling on voters to say whether they want to adopt it or not.

"We trust citizens, we believe in their judgement, we believe in their decision," George Papandreou, the prime minister, told ruling socialist party politicians on Monday.

"This will be the referendum: The citizen will be called upon to say a big 'yes' or a big 'no' to the new loan arrangement," he continued.

"This is a supreme act of democracy and of patriotism for the people to make their own decision ... We have a duty to promote the role and the responsibility of the citizen."

The EU deal aims to seek 50 per cent losses for private holders of Greek bonds and provide the troubled eurozone member with $140bn in additional rescue loans.

Papandreou appeared to take many politicians by surprise with the announcement. 

He gave no date or other details of the proposed referendum but said that he would seek a vote of confidence in parliament.

Papandreou's government has seen its majority reduced to just three seats in parliament and its approval ratings plummet amid harsh austerity measures that have fuelled national proteststs and are likely to send the country into a fourth year of recession in 2012.

John Psaropoulos, a journalist in Athens, told Al Jazeera that Papandreou likely called for a referendum because "the government has been looking for a new way to legitimise itself for months now, because it has been buffeted around so much by the unpopularity of these austerity measures".

"I think Mr. Papandreou has decided that this is his make-or-break moment and he doesn't want to stay in power any longer if he's going to be questioned," said Psaropoulos.

Nearly 60 per cent of Greeks view Thursday's EU summit agreement on a new euro bailout package as negative,
or probably negative, a survey showed on Saturday.