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Europe demands new Greek debt plan at crisis summit

European leaders warned Greek Prime Minister Alexis Tsipras to present new bailout proposals at an emergency summit on Tuesday or risk leaving the euro, after Greeks defiantly voted 'No' to further austerity in a referendum.

[BRUSSELS] European leaders warned Greek Prime Minister Alexis Tsipras to present new bailout proposals at an emergency summit on Tuesday or risk leaving the euro, after Greeks defiantly voted 'No' to further austerity in a referendum.

Tsipras will face his 18 eurozone counterparts in Brussels as the country's economy gasps for air, with banks closed until at least Thursday amid fears the Greek banking system is imploding.

German Chancellor Angela Merkel and French President Francois Hollande, heads of eurozone's largest economies, presented a united front on the eve of the summit, urging Tsipras to make "precise" proposals in a bid to rebuild shattered trust and restart negotiations.

"It is now up to the government of Alexis Tsipras to make serious, credible proposals so that this willingness to stay in the eurozone can translate into a lasting programme," Hollande said Monday after crisis talks with Merkel in Paris.

The meeting of the eurozone's two most powerful leaders came a day after Greeks rejected reform terms for a new EU-IMF bailout in a historic referendum that was a political victory for Tsipras but infuriated Europe.

For her part, Merkel said the conditions for a new Greek rescue package "have not yet been met." Merkel is under immense pressure at home to stay firm in talks with Greece.

Bild, Germany's biggest-selling newspaper, said her country needed an "Iron chancellor" at the summit, alongside a picture of her with a spiked helmet as worn by Otto von Bismarck, Germany's cunning first chancellor.

But France's number two leader Prime Minister Manuel Valls made clear that a Greek euro exit was not an option, drawing the line much more firmly than austerity-minded Berlin has so far.

"France is convinced that we can't take the risk of Greece leaving the eurozone," Valls told French radio on Tuesday, adding that France would do "everything" to keep it in.

European Commission head Jean-Claude Juncker also said 'Grexit' must be avoided but warned against expecting a deal on Tuesday.

"If we were going to come up with a solution today, that would be an overly simplistic solution," he told the European Parliament, adding later that he was in contact with Tsipras by text message.

The emergency eurozone summit is set to begin at 1600 GMT, after a meeting of eurozone finance ministers at which Greece's new finance minister Euclid Tsakalotos will make his first appearance.

The British-educated Tsakalotos was was thrust into the spotlight Monday after the surprise resignation of his firebrand predecessor Yanis Varoufakis, pushed out after relations with the EU had broken down.

Tsakalotos said the six-month-old radical Greek government wants "to continue the discussion" though how the far-leftists would use their resounding victory in the summit talks remained unclear.

He admitted to having "stage fright" upon assuming a post "not at the easiest moment in Greek history".

But analysts warned that the change would be more in style than in substance.

"In reality the move changes nothing, particularly since attitudes in some parts of Europe appear to have hardened," said Michael Hewson of CMC Markets.

In Sunday's referendum, Greeks voted by 61.31 per cent to 38.69 per cent to reject austerity terms in exchange for releasing more funds under an international bailout package.

But the situation remains grim with Greece's liquidity-starved banks unable to open until Thursday at the earliest.

Athenians awoke yet again Tuesday to the grim reality of closed banks and more lines at cash machines to make their daily withdrawal limit of 60 euros, as fears grew the ATMs could soon be running empty.

"I'm very afraid we will get no cash anymore in the coming days. They really have to fix it, end of this week at the latest, otherwise it (the economy) is collapsing," said pharmacist Lambros Vritios.

The European Central Bank, which has been keeping Greek lenders afloat, said Wednesday it had decided to maintain emergency funding to Greek banks - so-called Emergency Liquidity Assistance (ELA) - at its current level of 89 billion euros.

But it said Greece had to provide more collateral, a move that will make it more difficult to access the vital funds in the future.

Late on Monday, a Greek government source said Tsipras had spoken to ECB chief Mario Draghi to stress that Greek banks can only reopen with assistance from the Frankfurt-based lender.

Greece last week defaulted on a 1.5 billion euro repayment to the International Monetary Fund but head Christine Lagarde said her organisation was "ready to assist Greece if requested to do so".

Tsipras, 40, insists that instead of Grexit, the creditors will now finally have to talk about restructuring Greece's massive 320 billion euro debt.

The last EU-IMF bailout for Greece expired last Tuesday, despite Tsipras' appeals for it to be extended.


Read more about the Greek crisis HERE.