Europe demands new Greek debt plan at crisis summit

Brussels (AFP) - European leaders warned Greek Prime Minister Alexis Tsipras to submit new bailout proposals at an emergency summit on Tuesday or risk leaving the euro, after Greeks defiantly voted 'No' to further austerity.

The radical leftist leader 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 presented a united front when they met in Paris on the eve of the make-or-break summit, urging Tsipras to make "precise" proposals in order to restart talks.

Their tough stance was echoed by eurozone finance ministers and officials meeting hours before the summit, who warned that without a "credible" reform plan from the Greeks they could rule nothing out.

"Personally I am sceptical a deal will be found," Slovakian Finance Minister Peter Kazimir told reporters.

When asked if a so-called "Grexit" from the single currency was possible, EU Commissioner for the euro Valdis Dombrovskis said: "If trust is not rebuilt, if there is no credible reform package, it cannot be excluded".

- France will do 'everything' -

The summit comes two days after Greeks rejected reform terms for a new EU-IMF bailout in a hastily-arranged referendum that was a political victory for Tsipras but infuriated Europe.

Tsipras is expected to call for debt relief to cut Greece's massive 320 billion euro ($350 billion) debt mountain but that is a red line in many European capitals, especially in Berlin and the newer eastern members of the eurozone.

Paris and Berlin remain divided despite the Merkel-Hollande display of unity, with Germany's Economy Minister Sigmar Gabriel insisting that talks on reducing Greece's debt were impossible before Athens implements reforms.

But French Prime Minister Manuel Valls insisted that a Greek exit from the currency it joined in 2001 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, adding that France would do "everything" to keep it in.

A bridging loan is another possibility to get Greece -- which historically defaulted on its IMF debt last week -- through a huge payment of more than 3 billion euros to the European Central Bank on July 20, reports say.

Greece's new Finance Minister Euclid Tsakalotos is due to make his first appearance at Tuesday's Eurogroup meeting, a day after his outspoken motorbike-riding predecessor Yanis Varoufakis stepped down amid a rift with Athens's creditors.

The Oxford-educated Tsakalotos was due to hold face-to-face talks with Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, ahead of the meeting.

"It's going to be very difficult," Dijsselbloem said. "We'll have to await new proposals from the Greek government, hopefully they'll have them here today and they'll be credible."

- Grim in Greece -

Tsakalotos did not comment as he arrived in Brussels, but said earlier that 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.

The situation remains grim in Greece, where liquidity-starved banks are unable to open until Thursday at the earliest.

Athenians awoke yet again Tuesday to the bleak reality of closed banks and more lines at cash machines to make their daily withdrawal limit of 60 euros ($67), 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.

The ECB's future decisions on whether to keep Greece afloat will depend largely on the signals from the crunch meetings in Brussels on Tuesday, either that a deal is possible or that the gulf is too wide.

In Sunday's referendum, 61 percent voted to reject austerity terms in exchange for releasing more funds under an international bailout package.