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Europe shocked as Greece rejects austerity

Europe shocked as Greece rejects austerity

Stunned European Union leaders are weighing the consequences of the overwhelming Greek referendum vote to reject the austerity terms demanded by the country's international creditors.

The result of the referendum - with more than 60% voting No - represented a sensational victory for the country's radical left prime minister Alexis Tsipras, who had gambled all on the outcome.

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But it leaves the country's future in the EU hanging in the balance - with opponents warning he needs a new bailout deal fast if he is to avoid a catastrophic financial crash that could send it spinning out of the single currency.

Dutch finance minister Jeroen Dijsselbloem, who chairs the eurozone group of finance ministers, said the result was "very regrettable" for the future of Greece.

"For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities," he said.

German chancellor Angela Merkel and French president Francois Hollande - the two biggest players in the eurozone - will meet in Paris for crisis talks ahead of a summit of leaders of the single currency bloc in Brussels tomorrow.

In London, David Cameron will chair a meeting with Chancellor George Osborne, Bank of England governor Mark Carney and other senior officials to assess the likely impact on the UK.

Mr Tsipras - who hailed the voters for their "very brave choice" - said he would be seeking an immediate resumption of talks with the country's creditors in the eurozone and the International Monetary Fund (IMF).

But with Greek banks rapidly running out of cash and teetering on the brink of collapse, it was unclear if or when new bailout talks could resume.

Last night in Athens, jubilant supporters of the Syriza government poured into Syntagma Square opposite the Greek parliament to celebrate a result they regarded as a famous triumph and a decisive rejection of austerity.

Elsewhere however, despondent European politicians - who had previously warned that a No would be a vote to leave the euro - said Mr Tsipras had set his country on "a path of bitter austerity and hopelessness".

Although Britain is not part of the single currency bloc, Mr Osborne said that it could not be insulated from any resulting financial turmoil.

"Whatever Greece decides, Britain is prepared. We have the plans in place for whatever the outcome is," he told BBC1's The Andrew Marr Show.

"I don't think anyone should be in any doubt - the Greek situation has an impact on the European economy which has an impact on us. We cannot be immune from these developments."

In a televised address, Mr Tsipras hailed the result as a "victory for democracy" and urged the country to come together.

"I am fully conscious that the mandate you have given me is not a mandate against Europe but a mandate for finding a sustainable solution that will take us out of this vicious circle of austerity," he said.

Finance minister Yanis Varoufakis said the country would now reach out to the institutions - the IMF, the European Commission, and the European Central Bank - to try to find an agreed way forward.

"With this No we will try to co-operate with our partners and we will invite them one by one to see if we can find some common ground," he said.

But Germany's deputy chancellor Sigmar Gabriel said it was hard to envisage further bailout talks with the Greek government in the wake of the No vote.

He told the Tagesspiegel newspaper that Mr Tsipras had "torn down the last bridges, across which Europe and Greece could move toward a compromise".

"By saying no to the eurozone's rules, as is reflected in the majority No vote, it's difficult to imagine negotiations over an aid package for billions," he said.

Ukip leader Nigel Farage, however, hailed the result saying the whole "EU project" was now dying.

"It's fantastic to see the courage of the Greek people in the face of political and economic bullying from Brussels," he said.

A Number 10 spokesman said: " The Greek people expressed a decisive view in yesterday's referendum. This is a critical moment in the economic crisis in Greece. We will continue to do whatever is necessary to protect our economic security at this uncertain time.

"We have already got contingency plans in place and later this morning the Prime Minister will chair a further meeting to review those plans in light of yesterday's result."

The Government has also issued travel advice for British tourists, warning banking services, such as credit card purchase and cash withdrawals, could become limited at short notice.