Greece debt crisis: Angela Merkel and Francois Hollande issue Athens with 24-hour ultimatum to avoid crashing out of the euro

Vladimir Putin has 'expressed support for the Greek people' after a phonecall with Alexis Tsipras in the aftermath of the referendum

French President Francois Hollande and German Chancellor Angela Merkel during a press conference after their meeting at the Elysee Palace. The two leaders met to discuss the situation concerning the Greece in the European Union
French President Francois Hollande and German Chancellor Angela Merkel during a press conference after their meeting at the Elysee Palace. The two leaders met to discuss the situation concerning the Greece in the European Union

The eurozone’s two most powerful politicians have brushed aside the resounding No vote in the Greek referendum and told Athens that it has one last chance today to offer a new plan to get its economy in order – and avoid crashing out of the single currency. However, other leaders are losing patience, with the Dutch Prime Minister telling Athens to accept reforms or "it's over".

The unyielding line from the German Chancellor, Angela Merkel, and French President, François Hollande, came as the European Central Bank tightened the noose around Greece’s tottering lenders by squeezing their liquidity lifeline, ahead of Tuesday's summit of eurozone leaders.

The Greek government upped the stakes further by revealing that the Prime Minister, Alexis Tsipras, had telephoned the Russian President, Vladimir Putin, to discuss the consequences of the referendum in which Greeks voted by 61 per cent to 39 per cent to reject the EU’s previous austerity demands.

Alexis Tsipras,centre, and a government spokesman leaving the presidential palace in Athens after a meeting of party leaders

During the call, the Kremlin said, Mr Putin “expressed support for the Greek people in overcoming the difficulties facing their country” and that they discussed “several questions about the further development of Russian-Greek co-operation”.

Speaking as they began a joint summit meeting in Paris on Monday night, the German and French leaders said they respected the result of the Greek bailout referendum on Sunday, but added that it was now up to Athens to suggest a way forward.

Ms Merkel said the door to talks was still open, despite Sunday’s No vote, but Greece must put its proposals on the table urgently. “We must respect the vote of the Greek people but we must also respect the other 18 member states. That’s a matter of democracy,” she said, repeating her line that the EU bailout offer rejected on Sunday had been “a generous one”.

The Dutch Prime Minister, Mark Rutte, warned Athens that if it does not accept the creditors’ reform demands “it is over”. “Did Greeks really think that if they voted No, we would come and ask: ‘how else would you like it?’” he said, adding that his own government was currently unwilling to commit any more funds to Greece.

Mr Hollande was more conciliatory, speaking of the values that hold Europe together. “It is not just a monetary and finance construction,” he said.

The departure earlier in the day of the inflammatory Greek Finance Minister, Yanis Varoufakis – who resigned and drove off on his motorcycle – was interpreted as a sign that Mr Tsipras was serious about resuming negotiations over a viable, long-term solution for Greece. While his replacement, Euclid Tsakalotos, is considered equally radical, he is also seen as a man who can deal pragmatically with his fellow finance ministers.

Eurozone officials have said that if Mr Tsipras is ready to start negotiations on a new bailout in earnest, the Brussels summit could mark a turning point. In a terse statement, the Eurogroup said: “Ministers expect new proposals from the Greek authorities.”

The European Commission’s vice-president, Valdis Dombrovskis, poured cold water on prospects of a deal, insisting that debt relief was not on the table, and questioned the legitimacy of the referendum. He said the No vote would “dramatically weaken the negotiating stance of the Greek government and make things more complicated”, adding: “This is an outcome that very possibly may have no winners whatsoever.”

The referendum, he added, “unfortunately widens the gap between Greece and other eurozone countries. There is no easy way out of this crisis. Too much time and too many opportunities have been lost.”

But Mr Tsipras appeared to remain defiant and officials in Brussels cautioned that, given the deadlocks that have arisen at almost every summit and ministerial meeting since Mr Tsipras came to power in January, there was only a slim hope of progress. Mr Tsipras received congratulations from other left-of-centre world leaders, including Cuban President Raul Castro, who said the Greek government’s approach had been vindicated by the referendum.

Alexis Tsipras shakes hands with Vladimir Putin during a session of the St. Petersburg International Economic Forum (SPIEF 2015) in June. For the Russian President, a Greek alliance would be advantageous (AFP/Getty)

Banks in Greece remained closed, with the daily limit on withdrawals of €60 (£42) continuing alongside a ban on taking any cash at all from bank safety deposit boxes. They will not open on Tuesday or Wednesday, officials said.

Credit ratings agency Fitch said the No vote “dramatically increases” the risk of Greece leaving the eurozone.

The Greek Economy Minister, Giorgos Stathakis, urged the ECB to keep Greek banks afloat for a week to 10 days, so that rescue talks could progress between Athens and its main creditors, the European Commission, the ECB, and the International Monetary Fund (IMF).

But although the ECB has said that it would maintain overall levels of its liquidity lifeline to Greece’s private banks, it added that lenders would have to pledge more assets to gain the same amount of funding – a de facto tightening of terms for Greek banks as they are already running perilously short of cash. According to reports, some members of the ECB’s governing council wanted to take even “stronger measures” against Greek banks.

The IMF managing director, Christine Lagarde, said she stood “ready to assist Greece if requested to do so”, despite Greece having defaulted on its €1.55bn loan whose repayment was due last Tuesday. The IMF also said last week that Greece would need debt relief as well as new financing worth more than €60bn over the next three years to avoid financial collapse.

Yet in Athens there was pride in the result of the referendum. “Something happened with the Greek people,” said George Papadokostakis, 34, who runs the Due coffee shop in west Athens. “I’m very happy. We were in a dead-end situation [but] with the No vote we believe there may be something better.”

Euclid Tsakalotos has been a staunch left-wing Syriza supporter for years, serving as a member of the party’s central committee

Mr Tsakalotos, 55, is about as far in style from Mr Varoufakis as it is possible to be. An Eton and an Oxford-educated economist with a mild demeanour, he was previously the deputy foreign minister responsible for international economic affairs and has quietly headed Greece’s negotiating team since April when Mr Varoufakis was removed.

Born in the Netherlands and with a PhD from Oxford, he had taught at Athens University and was responsible for Syriza’s economic policy until he was moved to the foreign ministry. “He’s fairly well respected by the creditors, and is viewed as a safe harbour compared with the Varoufakis storm,” said Megan Greene, chief economist at Manulife and John Hancock Asset Management.

He saw the referendum as a tool to prod the creditors into becoming more flexible. “We see the referendum as part of the negotiation process, not in lieu of it. So we look forward to greater flexibility in the days to come,” had said in an emailed statement on 30 June.

Additional reporting by Nathalie Savaricas in Athens

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