France and Germany told Greece Monday to come up with serious proposals to restart financial aid talks, raising pressure on Prime Minister Alexis Tsipras to compromise a day after his country voted against more austerity.
After a meeting in Paris, German Chancellor Angela Merkel and French President Francois Hollande said Athens must move quickly if it wants to secure a cash-for-reform deal with international creditors and avoid crashing out of the euro.
Raising the stakes on the Greek leader ahead of a euro-zone summit on Tuesday, the European Central Bank decided to keep a tight grip on funding to Greek banks, which have been closed for more than a week to avoid a massive outflow of money that could lead to their collapse.
The ECB also decided to raise the amount of collateral Greek banks must post for any loans. The move doesn't affect the lenders right away, but it was a warning shot by the ECB to Greek banks that their fate lies in its hands.
And a German finance ministry official dismissed the idea that Berlin would be willing to concede some debt relief to Athens, a position that Tsipras' government has long sought.
Still, in a sign that Athens is keen to seek a new deal, Greece's combative finance minister, Yanis Varoufakis, resigned, apparently under pressure from other euro zone finance ministers who did not want him as a negotiating partner.
Tsipras had earlier promised Merkel that Greece would bring a proposal for a deal to an emergency summit of euro zone leaders on Tuesday, a Greek official said. It was unclear how much it would differ from other proposals rejected in the past.
"The door is open for discussion," Hollande told reporters, standing next to Merkel after talks at the Elysee Palace.
"It's now up to the government of Alexis Tsipras to offer serious, credible proposals so that this will can be turned into a programme which gives a long-term perspective, because Greece needs a long-term perspective in the euro zone with stable rules, as the euro zone itself does."
Not much time
Hollande stressed that there is not much time left while Merkel urged Greece to put proposals on the table this week.
Dutch Prime Minister Mark Rutte said Greece must accept deep reforms if it wants to remain in the euro.
He told the Netherlands parliament that creditors had no plans to draft a new proposal after the "No" vote and Greece had to come up with a new proposal ahead of Tuesday's summit.
"They must make a decision, this evening or tonight, what they are going to do," Rutte said. If the Greeks went to Brussels demanding changes because they felt supported by the "No" vote and refused reforms "then I think it is over".
After the Greek 'No' vote, gloomy officials in Brussels and Berlin said a Greek exit from the currency area now looked ever more likely.
But they also said talks to avert it would be easier without Varoufakis, an avowed "erratic Marxist" economist who infuriated fellow euro zone finance ministers with his casual style and indignant lectures. He had campaigned for Sunday's 'No' vote, accusing Greece' creditors of "terrorism".
His sacrifice suggested Tsipras was determined to try to reach a last-ditch compromise with European leaders.
Greece's political leaders, more accustomed to screaming abuse at each other in parliament, issued an unprecedented joint statement after a day of talks at the president's office backing efforts to reach a deal with creditors.
They called for immediate steps to reopen banks and said any deal must address debt sustainability - code for reducing Athens' crushing debt - but gave no hint of concessions from the Greek side towards its creditors' demands for deep spending cuts and far-reaching reforms of pensions and labour markets.
The chief negotiator in aid talks with international creditors, Euclid Tsakalotos, a soft-spoken academic economist, was appointed finance minister.
To win any new deal, Greece will have to overcome deep distrust among partners, above all Germany, Greece's biggest creditor and the EU's biggest economy, where public opinion has hardened in favour of cutting Greece loose from the euro.Defiance
While jubilant Greeks celebrated their national gesture of defiance late into the night, there was gloom in Brussels.
European Commission Vice-President Valdis Dombrovskis said there was no easy way out of the crisis and the referendum result had widened the gap between Greece and other euro zone countries.
An EU source said barring some major Greek concession, euro zone leaders were more likely to discuss on Tuesday how to cope with a Greek exit, and how to reinforce the remaining currency union, than any new aid programme for Athens.
While France and Italy have emphasised the importance of more talks, a big majority of the 19 euro zone government favour taking a hard line with Greece, diplomats said, and German public opinion is running out of patience.
Merkel's vice-chancellor, Social Democrat Sigmar Gabriel, told a news conference: "If Greece wants to stay in the euro, the Greek government must quickly make a substantive offer that goes beyond its willingness thus far."
The Greek bank association chief said an eight-day-old bank closure that has crippled the economy will continue on Tuesday and Wednesday and the daily cash machine withdrawal limit of 60 euros would be maintained. There were long lines at ATMs, where 20-euro banknotes have largely run out.
Greece's immediate fate is in the hands of the European Central Bank, which kept a tight funding grip on Greece's banks on Monday in a decision that will see them run out of cash soon.
There had been little prospect of the ECB adopting a more generous stance after Greeks voted overwhelmingly to reject the terms of an international bailout.
In a sign of mounting preoccupation at the country's financial state, Tsipras told European Central Bank President Mario Draghi during a phone call on Monday that there was an immediate need to lift capital controls, imposed in an effort to prevent a collapse of the banking system.