The European Commission has denied talks are ongoing between the Greek government and EU lenders on a bailout deal ahead of Sunday’s referendum.

Speaking in Luxembourg where he marked the beginning of Luxembourg’s six-month presidency of the Council of the European Union, the European Commission president Jean-Claude Juncker said no talks were underway.

“If the Greeks will vote ‘No’, the Greek position is dramatically weakened,” the Commission president said.

“The programme has come to an end, there are no negotiations under way, if the Greeks will vote no, they have done everything but strengthening the Greek negotiation position,” he added.

Other EU officials confirmed no talks had taken place since the expiration of the second bailout earlier this week.

Mr Juncker's comments directly contradict assertions by Greek finance minister Yanis Varoufakis on Friday that talks were underway between officials from the two sides in the Greek debt crisis.

Thousands of Greeks staged rival rallies on Friday ahead of the referendum. At least 20,000 people turned out at each rally.

Greek prime minister Alexis Tsipras on Friday said an IMF analysis showing Greece’s debt is unsustainable justifies his government’s decision to reject an aid package from creditors that offered no debt relief.

Renewing his appeal to Greeks to vote against the bailout package and say ‘No’ to blackmail and ultimatums. “Yesterday an event of major political importance happened,” Mr Tsipras said.

Earlier, European Commission vice-president, Valdis Dombrovskis, the vice-president with responsibility for the euro said that the referendum question on which Greek voters are being asked to vote “is neither factually nor legally correct.”

The proposals of the European Commission, European Central Bank and International Monetary Fund, which are to be voted on are based on a now expired credit program," he said in an article in Die Welt.

He also reiterated Jean-Claude Juncker’s asserting that a No vote would weaken the Greek negotiating hand. “It would be wrong to assume that a No would strengthen the Greek negotiating position. The opposite is the case.

“Following the closure of banks and the introduction of capital controls to attain financial stability again, it has become more complicated and more expensive.”

Mr Junker's comments come after Mr Varoufakis claimed early on Friday a deal on his country's debt would be agreed regardless of the outcome of Sunday's referendum.

Mr Varoufakis said if people vote ‘Yes’ to the proposed bailout terms the Greek government would sign up to the deal on the table.

However, if they vote ‘No’, as his government is urging, a deal would also be done, he said.

"During this week of impasse, we've had some very decent proposals coming from official Europe, confidentially, and a deal is more or less done," he told RTÉ's Morning Ireland programme.

"The difference between a 'Yes' and a 'No' vote is that a 'Yes' is going to lead to an unsustainable…a very bad agreement for both Greece and Europe," Mr Varoufakis said.

He said behind-the-scene negotiations were continuing despite public pronouncements from European leaders that no negotiations would take place until after Sunday’s vote.

Mr Varoufakis denied the vote would determine whether Greece remained in the euro zone, insisting the country would stay in the single currency and deposits in Greek banks were safe.

“The creditors have chosen this path of playing hardball, of blackmailing our government with bank closures but that’s going to end after the referendum, when we deliver a verdict one way or the other.”

A new poll has shown a slight lead for the Yes vote in favour of the bailout conditions at 44.8 per cent against 43.4 per cent on the No side, with 11.8 per cent undecided.

The latest poll was published a day after the International Monetary Fund (IMF) delivered a stark warning of the huge financial hole facing Greece, suggesting the country needed major debt restructuring and a possible debt write-down to tackle its “unsustainable debt”.

Mr Varoufakis admitted the IMF’s assessment was “music to his ears” as he and his government had been arguing all along that Greece’s debt was unsustainable.

Responding to Taoiseach Enda Kenny’s assertion that Greece should not be given debt relief, he said the Irish people had been “saddled with a preposterous debt” and that they should join forces with the Greeks and possibly the Portuguese to request “a very sensible” debt relief exercise.

Legal challenge

A legal challenge against Greece’s critical bailout referendum has been rejected, clearing the way for the vote to go ahead on Sunday.

The Council of State, the country’s highest administrative court, threw out a motion brought by two private citizens asking the court to rule the referendum illegal.

Spyridon Nicolaou, one of the two filing the motion, had claimed the would be invalid “because it expressly violates the constitution, which stipulates that a referendum cannot take place on economic matters”.

“But it’s also invalid because it doesn’t incorporate the text of the documents on which the Greek people are called on to decide. Would anyone from Evros (in far north-eastern Greece) know the specific documents?” he added.

A separate group filed a counter-motion supporting the referendum’s legality. One backer, Dimitris Belantis, said the Council of State has no jurisdiction over the matter and the constitution stipulates popular votes can be held on “crucial national matters”.

Simultaneous rallies are being held in Athens supporting Yes and No answers to a murky question in what an opinion poll suggests could be a very close vote.