Merkel and Hollande said Greek gov't must move quickly if it wants to secure a cash-for-reform deal with creditors and avoid crashing out of the single currency
France and Germany told Greece on Monday to come up with serious proposals in order to restart financial aid talks, a day after Greeks voted overwhelmingly to reject more austerity.
German Chancellor Angela Merkel and French President Francois Hollande, the euro zone's most powerful leaders, said Athens must move quickly if it wants to secure a cash-for-reform deal with creditors and avoid crashing out of the single currency.
Raising the pressure on Greek Prime Minister Alexis Tsipras before a euro zone summit on Tuesday, the European Central Bank decided to keep a tight grip on funding to Greek banks.
By voting decisively against tough bailout conditions, as Tsipras had urged them to do, Greeks have strengthened his negotiating hand. But the crisis remains acute, with the country's banks already closed for more than a week to avoid a massive outflow of money that could lead to their collapse.
Only emergency support from the ECB is keeping the banks afloat and saving Greece from a chaotic euro exit that would inflict more pain on its people and gravely damage the currency, the strongest symbol of the EU's drive for an "ever closer union" on a continent once ravaged by two world wars.
In a warning shot to the banks, the ECB raised the amount of collateral they must post for any loans. The move does not affect the lenders right away, but served as a reminder that their fate lies in its hands.
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 Tuesday's summit, a Greek official said. It was unclear how much it would differ from other proposals rejected in the past.
Late on Monday, the prime minister's office said Tsipras had spoken with EU Commission President Jean-Claude Juncker and Hollande. His office did not provide details about the conversations.
After talks with Hollande earlier in the day in Paris, Merkel said, "We say very clearly that the door for talks remains open and the meeting of euro zone leaders tomorrow should be understood in this sense."
But, she added, the requirements were not in place at the moment to start negotiations about a concrete euro zone bailout fund program.
Top officials in both the United States and Japan called on both sides to seek a resolution.
US Treasury Secretary Jack Lew spoke with both Tsipras the his new finance minister and said Washington looked forward to Athens and other parties resuming conversations toward resolving the Greek situation, a Treasury spokeswoman said.
Lew voiced hope such an outcome "will allow Greece to make difficult but necessary fiscal and structural reforms, return to growth, and achieve debt sustainability within the euro zone," the Treasury statement said.
Similarly, Japan's economics minister, Akira Amari, said Greece and the European Union should work hard to strike a win-win deal that would keep Greece in the currency union.
"I understand why the Greek people are venting their frustration. Fiscal consolidation is not making progress," Amari told reporters. "They are in deflation. The world expects Greece and the EU to cooperate on a final bailout plan."
A German Finance Ministry official dismissed the idea that Berlin would be willing to concede some debt relief to Athens, a position that Tsipras's government has long sought.
But an ECB governing council member, Ewald Nowotny, held out the possibility of bridge funding for Greece while a new bailout program is being negotiated. "Whether it's possible is something that has to be discussed," he told Austrian state TV.
Hollande said, "It's now up to the government of Alexis Tsipras to offer serious, credible proposals so that this can be turned into a program 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."
Hollande stressed that there was 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.
"(The Greeks) must make a decision, this evening or tonight, what they are going to do," Rutte told his Parliament. 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 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.
The chief negotiator in aid talks with international creditors, Euclid Tsakalotos, a soft-spoken academic economist, was appointed finance minister.
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 toward its creditors' demands for deep spending cuts and far-reaching reforms of pensions and labor markets.
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 favor of cutting Greece loose from the euro.
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 program for Athens.
While France and Italy have emphasized the importance of more talks, a big majority of the 19 euro zone governments favor taking a hard line with Greece, diplomats said.
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 would 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.
In a sign of mounting preoccupation at the country's financial state, Tsipras told ECB President Mario Draghi during a phone call on Monday that there was an immediate need to lift the capital controls.
After five years of economic crisis and mass unemployment, Greek electors voted 61.3 percent "No" to the bailout conditions already rejected by their government, casting Greece into uncharted territory.
The euro slid against the dollar after the vote, and European shares and bonds took a hit when markets opened after the weekend. But the losses were contained and there was no sign of serious contagion to other weaker euro zone sovereigns.
Analysts with several international banks said a "Grexit" from the euro zone was now their most likely scenario.
EU officials said it would be hard to give Greece easier terms, as its economy has plunged back into recession since Tsipras' Syriza party won power in January. Public finances were now in far worse condition than when the rejected bailout deal was put together.
But in Athens, citizens were unrepentant at their vote.
"I voted ‘No’ to austerity; I want this torture to end," said Katerina Sarri, 42, a mother of two.