05/18/2012 02:23 pm ET Updated Jul 18, 2012

Angela Merkel, Karolos Papoulias Discuss Greek Referendum For Staying In Eurozone

* Greece says Merkel, Papoulias discussed referendum

* German spokesman denies Merkel proposed idea

* Greek parties angrily reject referendum

ATHENS, May 18 (Reuters) - A Greek-German row broke out on Friday after Greece's government spokesman said Chancellor Angela Merkel raised the idea of Athens holding a referendum about its euro zone membership next month, which Berlin vehemently denied.

The confusion arose after a telephone call earlier on Friday between Merkel and Greek President Karolos Papoulias, in which Merkel conveyed her hope for a functioning government in Greece after repeat elections on June 17.

Greek government spokesman Dimitris Tsiodras said after the call that Merkel also raised the idea of a referendum. "(Merkel) relayed to the President thoughts about holding a referendum in parallel with the elections on the question whether Greek citizens wish to remain in the euro zone."

A German government spokesman rejected the idea that Merkel had proposed a referendum. "This is false and we completely dismiss this," the spokesman said.

Greece's international bailout, in which Germany is the single biggest contributor, has strained relations between the two countries as debt-laden Athens finds it increasingly hard to meet the harsh austerity measures Berlin demands.

Greece's May 6 election produced a hung parliament evenly split between pro- and anti-bailout parties, leading to a repeat vote set for June 17. EU leaders and officials have since warned that if the country fails to elect a pro-bailout government, Athens might have to abandon to euro.

A referendum could not be held under Greek law because Greece's current interim government has no authority to call it. "It is obvious that this issue is outside the scope of a caretaker government," Tsiodras said in his statement.

Several Greek parties accused Merkel of infringing on the country's sovereignty.

"The Greek people don't need a referendum to prove they're pro-euro," said conservative leader Antonis Samaras, who backs the international bailout. "Her idea is unfortunate, to say the least, and can't be accepted," he added.

"Ms. Merkel is used to address Greece's political leaders as if the country was a protectorate," said Alexis Tsipras, leader of the anti-bailout radical leftist SYRIZA.