Two members of the ECB’s governing council pushed for Greece’s banking sector to be hit with even tougher measures, according to Claire Jones of the Financial Times.

She writes:

The ECB refused to disclose the size of the new haircuts, but all four of Greece’s main banks are thought still to have enough collateral available to roll over their emergency loans.

Two people on the governing council objected to the decision, according to Eurosystem sources. Both of the objectors wanted the ECB to take stronger measures.

That implies either an even higher haircut (putting Greek banks in greater peril), lowering the ELA cap (ditto), or terminating ELA off (which would be game over for Greek banks).

The ECB may not have pulled the trigger on Greek banks tonight, but it is reserving the right to take a shot if Tuesday’s emergency summit doesn’t deliver any progress.

The European Central Bank has just raised the risk of a Greek bank going under, argues George Hay, European Financial Editor at Reuters Breakingviews.

Merkel returns to her favourite theme – that European solidarity and responsibility are linked.

Europe can only hold itself together if each country takes responsibility for itself, she says, insisting that Greece got a generous offer in the past.

Hollande also speaks of the values that hold Europe together. It is not just a monetary and finance construction.

Here’s some photos of Euclid Tsakalotos being sworn in as finance minister tonight:

Greek President Prokopis Pavlopoulos (centre) and Greek Prime Minister Alexis Tsipras (left) during the swearing-in ceremony of new Greek Finance Minister Euclides Tsakalotos (right). Photograph: Armando Babani/EPA

Photograph: Petros Karadjias/AP

Tsakalotos has an engagingly dressed-down style, even for a member of the current Greek government (frankly, he could pass for a eurocrisis liveblogger).

But he did make one concession to the majesty of the occasion…..

The US government has urged Europe and Greece to seek a compromise that will avoid Grexit.

White House spokesman Josh Earnest said it was in the best interests of America, and Europe, that the Greek crisis is solved. It is a “European challenge to solve”, he added.

Here’s a video clip of UK finance minister George Osborne updating the British parliament on the Greek crisis today:

Osborne has been criticised for not backing calls for Greece to be given debt relief.

Jonathan Stevenson, campaigns officer at the Jubilee Debt Campaign, said:

“The Chancellor was today given several opportunities by MPs from all parties to add his voice to calls for Greek debt cancellation, but he refused to take it. By sitting on the fence, rather than making the case for debt cancellation, he is failing to use his influence to help resolve this crisis, and thereby selling the people of Britain short.

The French stock market suffered from the Greek crisis today, with the CAC index shedding 2%.

Germany’s DAX fell by 1.5%, while in London the FTSE 100 index fell 50 points of 0.7%.

So, electronic red ink everywhere – but not a really serious selloff, given the scale of the shock last night when the referendum results came through.

This Google Trends data shows how Greeks have been searching for information on leaving the eurozone, and on the implication of yesterday’s referendum:

German finance minister Wolfgang Schäuble has insisted that it didn’t have any “personal problems” with Yanis Varoufakis, Greece’s former finance minister.

But it is true that the other euro finance ministers didn’t share Varoufakis’s opinion on many points, Schäuble added.

(that’s via Associated Press)

Here’s Reuters first take on the news that Greek banks won’t reopen tomorrow:

Greek banks will remain closed on Tuesday and Wednesday and a daily limit on cash withdrawals will stay at €60, the head of the Greek banking association said.

Greek banks were shuttered all last week after the collapse of negotiations on an aid deal and had officially been due to reopen on Tuesday, before Greeks voted resoundingly to reject bailout terms sought by creditors in a referendum on Sunday.

“We decided to extend the bank holiday by two days – Tuesday and Wednesday,” Louka Katseli said after a meeting with finance ministry and banking representatives.

Greek pensioners without bank cards line up outside bank to withdraw up to 120 euros for the week, in Athens today. Photograph: Marios Lolos/Xinhua Press/Corbis

The risk of Greece sliding towards a disorderly exit from the eurozone has “dramatically” increased following the No vote in last night’s referendum.

So warns rating agency Fitch tonight:

An agreement between Greece and its official creditors remains possible, but time is short and the risk of policy missteps, or that the two sides simply cannot agree a deal, is high.

Fitch adds that it will be “difficult” to reaching a deal before 20 July, when Greece must repay €3.5bn to the ECB.

A couple more lines from George Osborne’s statement to parliament on Greece.

He tells MPs that Britain has sent tax officials out on secondment in recent years, to assist with revenue collection.

Unfortunately, tax collection has “almost dried up” since the crisis escalated.

And the chancellor says Britain can’t suspend pension payments to expats in Greece, to protect them from capital controls. That would risk triggering financial problems, if people had set up rent payments, and suchlike.

And the worst thing for Britain, and the world, would be a completely disorderly situation in the next few weeks. That’s why we are urging all sides to reach a solution.

Back in Greece, Euclid Tsakalotos is being appointed as Greece’s new finance minister to replace Yanis Varoufakis, as had been rumoured.

One official told Reuters:

“Tsakalotos will be sworn in with the political oath as finance minister,”

As mentioned earlier, Tsakalotos is known as the brain behind Syriza’s economics policies, and has been handling the day-to-day negotiations with creditors for the last couple of months.

Labour MP Gisela Stuart asks:

Does Britain have any plans to fly euros into Greece to pay our pensioners, if they cannot get money out of the cash machines?

Osborne says that Britain has “a number of contingency plans, and we just hope we don’t have to put them into operation.”

Two years ago, when Cyprus imposed capital controls, Britain flew out large quantities of euros in military planes to pay soldiers based in the country.

Andrew Tyrie, a senior MP who chairs Britain’s influential Treasury Committee, asks George Osborne if he agrees that Greece can never repay all its debt, or return to sustainable growth at the current eurozone exchange rate.

Shouldn’t Greece issue its own currency?

Osborne won’t be tempted to give an opinion. We don’t like it when other counties tell Britain what currency to use, so it’s up to Greece to decide its own currency.

But, the challenge is balancing Greece’s desire to stay in the euro with the conditions that other eurozone members wish to put on it, he adds.

Osborne sums up the challenge facing Greece rather neatly.

There are two different timetables, the chancellor says — the political one, of meetings and negotiations to reach a possible deal, which proceeds quite slowly.

And there is the situation in the Greek banking sector, which is moving at a much faster pace.

The challenge for the eurozone and the challenge for greece is to bring those timetables together.

George Osborne says that tomorrow’s eurogroup and eurozone leaders meetings are crucial for Greece, although tonight’s Franco-German meeting (between Merkel and Hollande) is also important.

Chris Leslie, the shadow chancellor, warns that the European Union faces its most “fundamental test” in a generation.

With his duties at the finance ministry over, Yanis Yaroufakis can now turn his attention to more mundane issues – like his new book.

What does yesterday’s No vote mean for Europe? How can Angela Merkel respond? Will the departure of Yanis Varoufakis help?

Guardian columnist Jonathan Freedland and economics editor Larry Elliott explain all, in barely 180 seconds…..

German media are reporting that Alexis Tsipras and Angela Merkel have telephoned (as we flagged earlier), with both leaders agreeing that Greece will bring new proposals with him to the Euro group meeting which may help to overcome the crisis.

Further details of what they discussed have yet to emerge.

Also, a Spiegel correspondent in Greece, Giorgis Christides, is reporting that paper supplies are running out in Greece, with newspaper publishers saying they had enough paper left to print only up until next Sunday.

One publishing manager has even proposed halting the printing of books, until the shortage eases.

UK chancellor George Osborne due to address the UK parliament on the Greek situation shortly. My colleague Andrew Sparrow is covering it all in his politics liveblog.

The centre-left Pasok party has also agreed to back Alexis Tsipras in the looming debt negotiations.

Fofi Genimata, Pasok’s leader, did criticise the PM for only rallying support “at the eleventh hour”.

New Democracy, the centre-right opposition party, will also sign the common statement expressing support for Alexis Tsipras in negotiations with lenders.

ND was represented by Vangelis Meimaraki at today’s meeting, following the resignation of leader Antonis Samaras last night.

Meimaraki criticised Tsipras for calling today’s meeting so late, and said the PM bears responsibility for the crisis. But crucially, he did still sign the statement:

Ah, it appears that the communist KKE party will not support this joint statement from Greece’s political leaders:

(that’s Kammenos in the middle)

US stock markets have opened after the July 4 holiday long weekend and so far reaction to the Greek crisis is muted.

The Dow, S&P 500 and Nasdaq are all down around 0.5% in early trading.

So far US investors have largely shrugged off the Greek crisis and it looks like they same mood will prevail today. But anything can happen. During the last Euro-crisis US markets went on a roller coaster ride as investors worried about “contagion” and Greek woes spreading across Europe.

Yanis, we’re going to miss you

Alexis Tsipras must bring serious proposals to Brussels tomorrow to tackle the crisis created by his referendum, says German MEP Manfred Weber.

Weber, who chairs the centre-right EPP Group in the European Parliament, has also tweeted his concern that the “No” victory will drive nationalism in Europe.

The heads of Greece’s political parties are still meeting with president Pavlopoulos, as they discuss their response to Sunday’s referendum.

Simon Marks of MNI is tweeting from outside the talks:

Yanis Varoufakis does know how to make an exit (if not a Grexit)…..

Germany’s vice chancellor is warning that a third Greek bailout would include taxing conditions, as it would be issued under the European Stability Mechanism:

Gabriel is also worried that other bailed-out eurozone nations will demand help, if they see Greece getting relief:

Yanis Varoufakis says he hopes Euclid Tsakalotos gets the hot seat in the finance ministry.

Euclid does have decent credentials; a PhD in economics from Oxford, followed by academic postings, and a reputation as the “big brain” of Syriza’s economic policy making.

Standard Chartered has already said his appointment would make a positive outcome more likely (see here)

And he’ll have lots to talk to the UK chancellor about, too:

The Kremlin has issued a brief statement on the telephone call between Greek prime minister Alexis Tsipras and Russian President Vladimir Putin:

On Greece’s initiative, Vladimir Putin had a telephone conversation with Prime Minister of Greece Alexis Tsipras.

Mr Putin and Mr Tsipras discussed the results of the Greek referendum on international creditors’ conditions for providing financial aid to Athens, and discussed several matters concerning further development of bilateral cooperation.

Mr Putin expressed his support for the Greek people in overcoming the country’s current difficulties.

Was it the Daily Telegraph that did it?

The Wall Street Journal has an intriguing theory to explain Yanis Varoufakis’s shock resignation this morning.

They say that Alexis Tsipras decided to jettison his finance minister after he told the Telegraph that Greece could start issuing its own IOU notes to run alongside the euro, if the liquidity squeeze choking Greece isn’t lifted.

Here’s that interview:

Daily Telegraph: Defiant Greeks reject EU demands as Syriza readies IOU currency

Meanwhile Rosie Scammell has helpfully done a translation of the comments from Italian prime minister Matteo Renzi on his Facebook page.

There are two areas…to confront quickly in European capitals and Brussels. The first regards Greece, a country that is in a very difficult economic and social situation. The meetings tomorrow must indicate a definitive road to resolve this emergency.

The second – even more fascinating and complex, but no longer postponable – is that of Europe. For months we have been insisting on discussing not only austerity and budgets, but growth, infrastructure, common policies on migration, innovation, the environment. In one word: politics, not only parameters. Values, not only numbers.

If we stay at a standstill, prisoners of rules and bureaucracy, Europe is finished.

Rebuilding a different Europe will not be easy, after what has happened in recent years. But this is the right moment to try and do it, all together. Italy will do its part.

The downbeat comments about the prospects of a new deal with Greece, notably from Germany and the European Commission’s Valdis Dombrovskis, have seen the euro lose nearly all the gains it made after news came in of Yanis Varoufakis’ resignation as Greek finance minister.

And here’s AP’s summary of the earlier comments from Angela Merkel’s spokesman about the conditions not being there for new negotiations with Greece:

Chancellor Angela Merkel’s spokesman says Germany sees no basis at present for entering negotiations on a new bailout program for Greece, but that the door remains open.

Steffen Seibert said Monday that Germany respects the “clear ‘no’ vote” by Greeks against austerity measures demanded by creditors and that “the door for talks always remains open.”

However, he said the conditions are “not there at present to enter negotiations on a new program.” He said the “no” vote is a vote against the principle still supported by Germany that solidarity requires countries to take responsibility.

Seibert says Europe will explore what possibilities there are to help Greek citizens and “a lot will depend on what proposals the Greek government now puts on the table.”

Speaking of Russia, the country has said Greece and its creditors should reach a compromise as soon as possible. Bloomberg reports it is watching developments “closely” following the referendum:

“We treat with respect the voice raised during the plebiscite,” Kremlin spokesman Dmitry Peskov told reporters on a conference call on Monday. Russia would like Greece to take decisions that contribute to “social and economical stability in the country,” he said.

Greece has never asked Russia for financial aid in dealing with the debt crisis, Peskov said. Greek issues might be discussed on the sidelines of a BRICS summit in Ufa this week of leaders from Brazil, Russia, India, China and South Africa, though they are not on the official agenda, he said.

Full story here.

And this meeting of Greek party leaders may never end….

Helena Smith adds:

Reports now coming through that Tsipras has broken away from meeting with other party leaders to talk with German chancellor Angela Merkel.

Greek television channels have been breaking into scheduled programmes to announce that prime minister Alexis Tsipras will cut short the meeting currently taking place of political party leaders at the presidential palace to speak with Russia’s Vladimir Putin, reports Helena Smith. (We mentioned this possiblity earlier). Helena writes:

The two men will speak by phone. The cross party meeting of political leaders will then resume.

Interestingly, says, Helena, the Greek energy minister, Panagiotis Lafazanis, who has close ties with Moscow and heads the militant wing of Tsipras’ Syriza party, has also rushed to the presidential palace.

Meanwhile in Thessaloniki, people are hoping the no vote will prompt a resolution, finally, to the financial crisis. Angelique Chrisafis reports:

Stefanos Dimos was standing at his Thessaloniki flower shop, which for 62 years has been arranging bouquets to mark the births, deaths and weddings of locals in Greece’s second city. He had been weathering the crisis for five years, but this morning, after Greece’s resounding no vote, he said he felt optimistic.

In five years of austerity, Dimos had seen his trade fall by 50% and had to lay off two staff. Since last week the capital controls and bank closures that are still in place have seen his trade drop 90%, despite the summer wedding season. “The economy has virtually stopped,” he said. But like many “No” voters, Dimos, 52, held the prime minisiter Alexis Tsipiras to his word that there would be a new negotiation and a better deal for Greece. “We’re optimistic that there will be an agreement that is good for Greece and good for Europe. The “No” vote was a good result because it sent a clear message that we can’t have any more austerity. I see people foraging in bins here every day for food, something that didn’t happen before the crisis.”

He added: “We’re hoping that the deal will be improved, that debt will be eased, allowing business activity to start up again. Things have ground to a halt.”

Another florist in the city centre said he was happy with last night’s strong “No” result, even though he himself had tentatively voted “Yes”. He said: “I voted yes because I wanted Greece to stay in Europe. But I’m still pleased today because — like everyone else — I don’t want more austerity. I’m happy with the outcome as it voiced our feeling that we can’t take it any more. Austerity has been a dead-end for growth and for our economy.”

Outside a nearby bank, a small queue of pensioners gathered early to access limited amounts to their pensions, and a small line of others waited to withdraw their daily €60. One lawyer who had voted yes said: “There’s an urgency in getting a new deal as fast as possible because banks are facing a real liquidity problem, they can’t last much longer. Any new deal now has to satisfy all the other eurozone members, it’s not going to be easy. In fact, it’s going to be very difficult here.”

Constantin Petropoulous, 88, and his wife Georgia, 80, were standing at the back of the queue, waiting to access a portion of their monthly pensions that had shrunk to €600. Like many in the city, they had spent decades as labourers in Germany, where Constantin had worked for Bosch in Stuttgart, returing to Thessaloniki to later work in a shop. “The real challenge for Greece this week is this feeling of the unknown, the uncertainty,” he said. “Whether the vote had been yes or no, things would have been difficult. We know it will be a very hard week. We just have to be patient.”

The European Central Bank’s governing council is due to discuss emergency funding to Greek banks in a telephone call later this afternoon, sources have told Reuters.

In Athens, cash machines are increasingly failing to dispense the full amount allowed under the current capital controls. John Hooper reports:

A tour of banks in the capital this morning showed that, while depositors are notionally allowed €60 a day under the capital controls, increasingly €50 is the norm. That could help explain why the government is reportedly confident that Greece’s ATMs can continue to dole out cash till Friday.

Of seven cash machines visited, only two were dispensing the full amount, ostensibly because the banks are running out of €20 notes. At Alpha Bank on Alexandras Avenue, Irene Abatzi said: “I don’t care if it’s fifty or sixty, just so long as the machine carries on giving out cash.”

Elsewhere, customers were less phlegmatic. A man in the up-market quarter of Kolonaki exploded with rage when he found out that a payment had not been made to his account, and that he could not withdraw anything.

The banks were opening their doors to pensioners, but in at least two parts of the city the pensioners were being told that only those who failed to get their pensions last week could be served. The deputy finance minister, Nadia Valavani, highlighted the intensity of the cash squeeze in a statement on Sunday, telling safe deposit owners they could retrieve valuables – but only with a bank employee standing over them to ensure they did not take out cash as well.

In Spain Pablo Iglesias, leader of the anti-austerity party Podemos, welcomed the results of the Greek referendum but cautioned those who sought to draw parallels between Spain and Greece. Ashifa Kassam in Madrid reports:

“It’s a very clear message,” Iglesias told Spanish radio Cadena Ser. “The citizens of Greece have said that austerity isn’t the way to end the economic crisis.”

He called on Europe’s leaders to reach an agreement with Greece, pointing to the resignation of Greek finance minister Yanis Varoufakis. “Now there is no excuse. The time has come for sensibility and to find a reasonable agreement.”

On Varoufakis’ resignation he said: “It hurt me a lot because I think he’s an excellent economist….but I think the act of resigning is honorable as it will help the push for the agreement that his country needs.”

With a general election due in Spain by the end of the year, Iglesias carefully chose his words, knowing that the situation in Greece could drive moderate voters away from his party. “We have a great friendship with Syriza, but luckily, Spain is not Greece. We’re an economy with much more weight in the eurozone, we’re a country with a stronger administration and with a better economic situation,” he said, taking aim at the many comparisons being drawn between Spain and Greece. “The circumstances are different and I think it makes no sense to draw these parallels.”

The situation in Greece has been used by the governing People’s Party to justify the austerity measures imposed during the height of the economic crisis. “Fortunately Spain has a prime minister who said no to the bailout and instead undertook reforms,” PP vice-president Fernando Martínez-Maillo told broadcaster Radio Nacional de España on Monday. “Thanks to those reforms…we’re in a situation of economic growth and job creation.”

Spain’s finance minister, Luis de Guindos said on Monday that although the No vote made the situation more complex, everyone wants Greece to “stay in the euro.” His government is ready to talk about a third bailout, he added, but only if Greece was willing to play by the rules.

Eleni Varvitsiotis of Greek newspaper Kathimerini is not very upbeat about Dombrovskis:

More from Dombrovskis:

Britain has called on Greece and its eurozone partners to sit down together and find a sustainable solution, Reuters reports.

Prime minister David Cameron’ spokeswoman said finding a solution was clearly in Britain’s best interests, and Britain supports a 28 member EU.

Meanwhile the ECB’s Ewald Nowotny, also president of the National Bank of Austria, said any new Greek deal needs time. To expect an agreement within two days – as Greece had suggested – is “illusionary.”

And regarding the emergency liquidity assistance for Greek banks:

Greek prime minister Alexis Tsipras has reportedly already been on the phone to European Central Bank president Mario Draghi – not surprising when the ECB has to decide its next move with regard to Greek banks.

Meanwhile Tsipras will apparently also speak to Russian president Putin on the phone before the end of the day.

And here’s a bit of a dampener on things, from Austria’s Finance Minister Hans Joerg Schelling:

But he did say he hopes talks would be easier now Varoufakis has gone.

And as a tribute to Yanis Varoufakis brief but colourful period as Greek finance minister, here is a piece of video from 1993. As an economics professor he was discussing government policies and, topically, austerity.

Spain’s economy minister Luis de Guindos has echoed that Greece should remain part of the eurozone and the euro is irreversible.

He said the Spanish government was open to negotiating a third bailout, and any new Greek package should include a comprehensive analysis of Greek needs.

(Quotes courtesy Reuters).

Donald Tusk, President of the European Council, has confirmed this morning’s conference call and its participants:

Greek banks can keep allowing withdrawals until Friday, depending on what happens with the ECB, the BBC’s Robert Peston has reported:

Meanwhile, earlier:

The Eurogroup – which as we said earlier is to meet on Tuesday – has said it expects new proposals from Greece. In a statement it said:

The Eurogroup will discuss the situation following the referendum in Greece that was held on 5 July 2015. Ministers expect new proposals from the Greek authorities.

The referendum was held after the Greek government unilaterally withdrew from ongoing negotiations with the institutions (the European Commission, the European Central Bank and the International Monetary Fund) on Greece’s comprehensive reform plan, foreseen under the agreement of February 2015.

The Eurogroup will be meeting tomorrow ahead of the eurozone leaders’ summit, its president Jeroen Dijsselbloem has just said:

As the European Central Bank decides about liquidity for Greek banks – ahead of the July 20 date for the country to repay €3.5bn on a bond held by the ECB – economist Dario Perkins at Lombard Street Research points to one possible outcome:

UK papers have reflected the uncertainty over the what comes next for the eurozone, as Roy Greenslade reports:

Crisis, chaos, turmoil. Today’s British national newspaper headlines reflect the seriousness of the situation facing the European Union and the eurozone after the referendum vote in Greece.

Several of the newspapers also convey the sense of bafflement at what happens next: “Europe faces crisis after gambling Greeks say No” (The Times); “Europe in turmoil as Greeks vote No” (Daily Telegraph); “Greek ‘no’ plunges Europe into crisis” (The Independent); “Greeks vote ‘no’ – Europe shudders (i); and “Greece’s eurozone future hangs in balance as No vote set to triumph” (Financial Times).

The Daily Mail and Daily Express engage in some prediction: “Meltdown: EU in crisis as Greece votes ‘no’ to crippling cuts and heads for eurozone exit” and “Greece ready to leave the Euro after day of chaos”.

Two prefer to state the bald fact: “Greek voters defy Europe” (The Guardian) and “Greeks vote no” (Metro). And the red-tops, being the red-tops, indulge in puns: “Greeky bum time” (The Sun); “Rhodes to ruin?” (Daily Mirror); and “It’s Greece frightenin’.” (Daily Star).

But there is nothing to smile about in the editorials, several of which refer to it, predictably, as a “Greek tragedy.” Newspapers opposed to the EU or, at the least, to the euro, barely conceal their delight at the possible unravelling of the eurozone.

Full story here:

Here’s Alexis Tsipras and his colleagues at their meeting this morning to discuss their next move after the no victory in the referendum:

Earlier Tsipras met Greek president Prokopis Pavlopoulos:

ECB member and Bank of France governor Christian Noyer has been commenting on Greek finances:

This refers to Greek debt held by the ECB, which he says cannot be restructured because it would be monetary financing of a state.

According to the bookies, Greece will not leave the eurozone this year but Britain is likely to vote to leave the EU in a referendum:

European Commission president Jean-Claude Juncker will hold a conference call with the Eurogroup and European Central Bank (among others) this morning.

In a statement the commission said it “takes note of and respects the result of the referendum in Greece,” and added:

President Juncker is consulting (…) with the democratically elected leaders of the other 18 Eurozone members as well as with the Heads of the EU institutions. He will have a conference call among the “Euro-Institutionals” (with the President of the Euro Summit, the President of the Euro Group and the President of the European Central Bank) on Monday morning. He intends to address the European Parliament in Strasbourg on Tuesday.

On Tuesday 7 July at 18h a special Euro Summit will take place to discuss the situation after the referendum in Greece.

Fabio Sdogati, professor of International Economics at Politecnico di Milano, the largest technical university in Italy, is clearly a Varoufakis fan:

More from Simon Goodley on IG’s trading floor:

Despite Greece being the world’s biggest financial story since, er, the last time Greece was the world’s biggest financial story, there is surprisingly little activity in the equity markets, where volumes are low. According to Alastair McCaig, market analyst at IG, this is because investors don’t like uncertainty and nobody knows what is going to happen next.

He said: “Ask politicians what is happening with Greece and they say ‘I don’t know’. Markets are the same. Greece has surprised at every opportunity. Last week they surprised by calling a referendum. This week they surprised by voting ‘no’. They have the propensity to surprise again”.

Added to that, there is also the wobbly Chinese stock market, which is causing further nervousness (and which here they suspect is a bigger markets story) plus the fact that we are currently inhabiting a month between May and September – a section of the year the City tends to like to take off.

So, is Grexit more or less likely now given the developments of the last few hours:

However:

Euclid Tsakalotos, the Oxford-educated chief spokesman of the economics ministry, has been tipped as the most likely replacement for Yanis Varoufakis, writes Jennifer Rankin.

“He is one of the most sensible/moderate figures in Syriza and his appointment, if confirmed, would increase the chances for a sensible negotiation and a positive outcome,” Demetrios Efstathiou of Standard Chartered bank said.

Back in the bond markets and UK 10-year gilt yields have hit their lowest level since mid-June, with investors seeing the UK as something of a haven.

The no vote raises the risk of Greece leaving the eurozone, but the basis for a dialogue between the two sides still exists, according to French finance minister Michel Sapin.

He also said discussions of possible debt relief were “not taboo” and said France had put this proposal on the table. MNI reports:

“The ‘no’ carries a considerable risk for Greece,” Sapin told Europe 1 radio. “In this risk for Greece is the risk of an exit from the euro. But there is nothing automatic.”

Sapin said that “there is on the table a basis for dialogue but it is up to Greece to show that it will take this dialogue seriously.” He said it was “up to the Greek government and Mr. Tsipras to make new proposals as quickly as possible.”

Sapin declined to comment on the possible reaction of the European Central Bank to the Greek vote, other than to say that “there is a level today of liquidity. This level of liquidity cannot be reduced.”

Greek bond yields are currently up 139 basis points at 16.24% but they have been higher this morning:

And here’s a (typical) reaction from London mayor Boris Johnson:

Some timings for German comments on the Greece situation, courtesy Reuters:

Elsewhere German industrial orders fell by just 0.2% in May, better than an expected 0.4% decline, despite the current eurozone crisis.

Economist Dr. Andreas Rees at UniCredit said:

After two consecutive and strong rises, German new orders in the manufacturing sector declined a moderate 0.2% month on month. The latest decrease is neither driven by a fundamental deterioration nor by the events in Greece.

The direct macro impact is limited, as only 0.4% of all German exports are shipped to Greece. The same is true for other eurozone countries. The most likely scenario going forward is that German companies (and their peers in the eurozone) will resume momentum in the next few months.

Italian Prime Minister Matteo Renzi is due to meet his finance minister, Pier Carlo Padoan, at 9.30am (8.30am BST) today to discuss the Greek referendum, writes Rosie Scammell. As the result came in last night, Padoan took to Twitter to share his views on the vote:

(Italy has always worked for a solid and more integrated Europe. It was true yesterday and it will still be true tomorrow.)

(Shared rules by European peoples serve to guarantee the same objectives: affluence through economic growth and employment )

(Reforms and investments are in all countries the key to regain sustainable growth)

The Greek government spokesman has just said Varoufakis’ replacement will be announced after the meeting of party political leaders. That would suggest the leftist-led government is attempting to find consensus over the issue, Helena Smith reports.

The spokesman said.

As finance minister Yanis Varoufakis placed a leading role in negotiations from the government’s first day. The prime minister feels the need to thank him for his ceaseless effort to promote the positions of the government and the interests of the Greek people under very difficult circumstances. After the meeting of political leaders, his replacement will be announced.

Banking shares are among the major fallers, given the prospect of contagion from the struggling Greek banking system.

Deutsche Bank is down 2.7%, Santander 2.6% and Italy’s Monte Dei Paschi is 3.5% lower. In the UK Barclays and HSBC have both fallen around 1.2%.

But generally the reaction so far has been fairly subdued – at least compared to the expected falls.

Of course, the surprise resignation of Yanis Varoufakis has probably helped limit the damage, since it could well make negotiations easier when leaders meet on Tuesday.

Other events to watch out for today:

• The UK government and the Bank of England are to review continency plans
• Germany’s Angela Merkel and France’s Francois Hollande are to meet tonight ahead of a leaders’ summit on Tuesday
• Greek prime minister Alexis Tsipras is putting together his new negotiating team

More reaction, this time from Italy. Rosie Scammell writes:

Italy’s newspapers are today awash with Greek flags, with most leading on the impact the no vote will have on Europe. “Greece, a slap in Brussels’ face” reads the front page of left-leaning daily La Repubblica, while Italy’s leading daily, Corriere della Sera, writes “The Greek NO scares Europe”.

In covering the resignation of the Greek finance minister, Yanis Varoufakis, Italian media have honed in on his fashion choice. Varoufakis appeared at a press conference in a grey t-shirt on Sunday night, before today announcing his decision to quit. Italians themselves are still getting used to the casual clothing choices of their own prime minister, Matteo Renzi, who often makes public appearances in jeans.

The surprise resignation of Yanis Varoufakis comes ahead of a meeting tomorrow between eurozone leaders to discuss their next steps following the no victory in the referendum.

That could of course make things easier for Greek prime minister Alexis Tsipras in any discussions with his peers. Varoufakis himself said as much: “I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my … ‘absence’ from its meetings.” Over the weekend he had accused Greece’s European creditors of “terrorism.”

And in keeping with his tenure as finance minister he ended with a jibe at his tormentors: “I shall wear the creditors’ loathing with pride.”

His departure was not the first in the wake of the vote – yesterday Antonis Samaras, the head of the opposition rightwing New Democracy party who campaigned for the yes side, stepped down.

But the decision by the motorcycle-riding, game-playing Varoufakis has far more significance, as shown by the fact the euro recovered some of its lost ground in the wake of the announcement:

Here’s an early call on how European markets are expected to open, courtesy IG:

Here’s the very immediate response from some of the financial markets.

A short time before the post announcing his resignation, Varoufakis posted a much more jubilant note about the referendum decision:

On the 25^th of January, dignity was restored to the people of Greece.

In the five months that intervened since then, we became the first government that dared raise its voice, speaking on behalf of the people, saying no to the damaging irrationality of our extend-and-pretend ‘Bailout Program’.

We

• spread the word that the Greek ‘bailouts’ were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers
• articulated, for the first time in the Eurogroup, an economic argument to which there was no credible response
• put forward moderate, technically feasible proposals that would remove the need for further ‘bailouts’
• confined the troika to its Brussels’ lair
• internationalised Greece’s humanitarian crisis and its roots in intentionally recessionary policies
• spread hope beyond Greece’s borders that democracy can breathe within a monetary union hitherto dominated by fear.

Ending interminable, self-defeating, austerity and restructuring Greece’s public debt were our two targets. But these two were also our creditors’ targets. From the moment our election seemed likely, last December, the powers-that-be started a bank run and planned, eventually, to shut Greece’s banks down. Their purpose?

Here’s our latest report on Varoufakis’ resignation. More details to be added shortly:

The Greek finance minister Yanis Varoufakis has resigned in the wake of the country’s resounding no vote rejecting the eurozone’s austerity terms.

Writing on his blog on Monday morning he said that he would be standing down immediately after pressure from Greece’s European partners.

“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my … ‘absence’ from its meetings,” he wrote.

The prime minister Alexis Tsipras judged this to be “potentially helpful to him in reaching an agreement. For this reason I am leaving the ministry of finance today”.

He added: “The referendum of 5 July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

“Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25 June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Varoufakis’ presence in further negotiations was always going to be difficult after his public rhetoric about the role of European leaders.

In one interview published on Saturday, he accused the country’s creditors of terrorism:

“What they’re doing with Greece has a name: terrorism,” Varoufakis told Spain’s El Mundo. “What Brussels and the troika want today is for the yes [vote] to win so they could humiliate the Greeks. Why did they force us to close the banks? To instil fear in people. And spreading fear is called terrorism.”

On Sunday night he promised to resign in the event a yes vote was recorded. Despite the outcome of a no vote, he has still followed through on that decision to resign.

Peter Kazimir, the Slovakian finance minister, has also made some rather colourful observations of the current situation overnight:

The UK government is also prepared to do whatever necessary to protect the country from the impact of a possible exit from the Eurozone for Greece. This from AFP is the latest update:

Britain will do “whatever is necessary to protect its economic security”, a government spokesman said Monday after Greeks voted overwhelmingly against austerity in a referendum that could send them crashing out of the eurozone with unknown consequences.

“This is a critical moment in the economic crisis in Greece,” a Downing Street spokesman said. “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 front pages of newspapers across Europe are a combination of fear, hope and (on occasion) somewhat comical absurdity.

Here’s a short sample of a few of them, starting off with a rather extraordinary one from Efsyn featuring Dutch politician Jeroen Dijsselbloem:

Here’s the Guardian’s view on the current impasse now facing Europe following the Greek referendum:

Kicking the can down the road has been the cliche of choice over a slow euro crisis that has steadily strangled the life out of the Greek economy. But at some point Europe was bound to run out of road. That happened on Sunday night, when it emerged that the Greek people had said no to continuing to engage with their creditors on the same suffocating terms.

Just over a week ago, Alexis Tsipras staked his future on forcing this denouement. The eight days that followed his midnight declaration of a plebiscite, to accept or reject the creditors’ terms for the latest slug of overdraft, have witnessed many extraordinary things. The Greek parliament licensed a hasty referendum on a question that had already been overtaken by events. A ballot paper written in jargon posed a ludicrously technical question, opening up a void for emotion to fill. Mixing talk of “terror” from their partners with haze about what would happen after a no, Mr Tsipras and his finance minister, Yanis Varoufakis, aimed squarely for the heart rather than the head. Meanwhile, Greeks faced the fiercest financial controls ever seen in modern Europe: bank doors were shut, supplies disrupted, and citizens queued at every cashpoint for their ration of notes. In countries such as Germany, where history engenders suspicion of referendums, it may have looked like a paradigm case of how not to do democracy.

As the sun begins to rise now in Greece on “the morning after” Syntagma Square appears empty. That may well change as another highly politically charged day is set to get underway across Europe

John Cassidy in the New Yorker has outlined some useful analysis on the implications of the no vote:

Whether they will be offered one within the eurozone remains to be seen. Although the result was a great political triumph for Tsipras and Syriza, it doesn’t automatically translate into a victory in the showdown with the European Union and the International Monetary Fund. Greece is still broke, and its banks are still closed. If the Europeans want to force the Greeks out of their currency club, they have the means to do it at any moment. All they have to do is turn off the credit that the European Central Bank has been providing to Greece’s banks. Indeed, the ECB’s governing council will decide on Monday what to do next.

With Angela Merkel, the German chancellor, and François Hollande, the French president, due to meet in Paris on Monday afternoon, and an emergency summit of all European Union leaders scheduled for Tuesday, it seems highly unlikely that the ECB. will render these deliberations pointless by immediately torpedoing the Greek financial system. In all likelihood, there will be at least one more round of talks between the two sides, and, quite possibly, more than one. Greece’s next big payment to its creditors isn’t due until 23 July, which is more than two weeks away. If the country’s banks can somehow be propped up until then, there is time for more deliberation.

We’ve written a lot about the market reaction to events in Europe, but the political fallout in Greece is still likely to unfold rapidly over the next few days.

Prime minister Alexis Tsipras is convening a meeting of key political leaders at 10am on Monday in Athens, according to Enikos. Overnight the Greek opposition leader Antonis Samaras resigned following the referendum decision.

How Tsipras proceeds throughout this week will continue to shape how events unfold across Europe.

China’s response to the Greek referendum and the market uncertainty has been to engage in a series of complex manoeuvres aimed at stimulating the market.

It’s not yet clear how successful the measures – which involve a variety of investments and buyouts aided by the central bank – will be in preventing setbacks for their markets.

Reuters have a good take on the different measures that have been employed here:

Chinese stocks jumped on Monday after Beijing unleashed an unprecedented series of support measures over the weekend to stave off the prospect of a full-blown crash that was threatening to destabilize the world’s second-biggest economy.

In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.

Investors, who had ignored official measures to prop up the market as equity indexes slid around 12% last week, finally reacted, with the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen jumping 4%, while the Shanghai Composite Index .SSEC gained 3 percent. [.SS]

Blue chips, the explicit target of the stabilization fund, outperformed stocks on the small-cap ChiNext indexes.

The rapid decline of China’s previously booming stock market, which by the end of last week had fallen around 30 percent from a mid-June peak, had become a major headache for President Xi Jinping and China’s top leaders, who were already struggling to avert a sharper economic slowdown.

In response, China has orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

My colleague Justin McCurry has filed a more comprehensive take on the Asian market reaction to the Greek referendum, which largely recorded falls across the board but with limited losses.

China is the exception – it saw a boost on open this morning – but that is attributed to the enormous and unprecedented government measures implemented over the weekend to try and stop a market crash.

This from Justin:

Analysts said that regional market panic was unlikely, even after Athens appeared to take a step closer to a “Grexit” by roundly rejecting the bailout terms set by its international creditors But they added that negotiations this week would be critical.

“The Greece ‘no’ vote is a surprise,” Shoji Hirakawa, chief equity strategist at Okasan Securities, told Bloomberg News. “But the key is that the direction is going toward more talks after this.”

Other analysts said markets had not expected Greek voters to reject the terms of the bailout so emphatically – a move that could see further losses on Monday and trigger an investor rush to US Treasuries or other government bonds that are seen as largely immune to market turbulence.

…

In one of the day’s more colourful commentaries, analysts at Japan’s Mizuho Bank said the Sunday’s “Greferendum” had turned out to be a “Grief-erendum”.

On what most had expected to be a tricky day for markets around the world, dealers stressed that uncertainty over Greece’s future had not rocked markets as badly as some might have expected.

Read his report in full here.

“The fightback for a Europe of dignity starts here.”

Another short documentary from John Domokos and Phoebe Greenwood.

As Syriza supporters flock to Athens’ Syntagma square to celebrate, Phoebe Greenwood talks to those who are celebrating a historic referendum outcome. ‘They thought they could intimidate us,’ one man says. Despite jitters on the financial markets, others happy with the historic oxi (no) vote say they hope it will be the moment that Greeks can come together.

Argentinian president Cristina Fernández de Kirchner, who is never shy of enthusiastically tweeting her opinions, has welcomed the referendum results.

In a series of tweets written in English, Fernández labeled the No vote an “outright victory of democracy and dignity.”

The Greek people have said NO to the impossible and humiliating conditions imposed upon them for the restructuring of their foreign debt. We Argentines understand what this is about. We hope Europe and its leaders understand the message of the polls. Nobody can be asked to sign their own death certificate. The words of President Kirchner still resound at the UN General Assembly in 2003 he said: “The dead do not pay their debts.”

Some background on the link between Argentina and Greece in this current crisis, from Reuters:

There are stark similarities between Argentina’s 2002 financial meltdown and the turmoil in Greece: rigid monetary regimes, creditors battling domestic politics to fix the problem and banking systems at breaking point.

The South American grains behemoth defaulted on $100 billion in bonds in a 2002 crisis that thrust millions of middle-class Argentines into poverty. By the next year, helped by a massive soy crop, Argentina started growing again.

But the 2002 crisis continues to plague its finances.

Fernandez regularly blasts bondholders who have sued the country over the debt it failed to pay 13 years ago.

Most holders agreed to restructurings that paid about 30 cents on the dollar, while a group of hedge funds sued for full repayment.

The country defaulted again last year when a U.S. judge barred it from honouring its restructured debt without reaching a deal with the funds, which Fernandez denounces as “vultures.”

Argentina became one of the world’s fastest expanding economies after its default, growing at an averaging above 8.5 percent between 2003 and 2007, when Fernandez was first elected.

Since then she has ordered trade and currency controls that have slowed investment while government fiscal accounts deteriorate due to high state spending.

Greek finance minister, Yanis Varoufakis, has claimed the successful No campaign is a “majestic, big YES to a democratic, rational Europe.”

Varoufakis accuses Greece’s creditors of attempting to “humiliate” the leftwing government by forcing stringent austerity, and dragging them into an agreement which “offers no firm commitment to a sensible, well-defined debt restructure.”

He further writes:

Today’s referendum delivered a resounding call for a mutually beneficial agreement between Greece and our European partners. We shall respond to the Greek voters’ call with a positive approach to:

• The IMF, which only recently released a helpful report confirming that Greek public debt was unsustainable
• The ECB, the Governing Council of which, over the past week, refused to countenance some of the more aggressive voices within
• The European Commission, whose leadership kept throwing bridges over the chasm separating Greece from some of our partners.

Shanghai stocks have jumped almost 8%. The government boosts AFP refers to are emergency measures taken to prevent a possible stock market crash in the world’s second-largest economy. It’s not directly related to Greece, but could still have an effect on world markets.

From Reuters: In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company which in turn would be aided by a direct line of liquidity from the central bank.

China has also orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

Europe dodged a bullet with the No result, and its supporters should be breathing a sigh of relief, Paul Krugman writes for the New York Times.

Krugman’s colourful take on the events of the last day is well worth a read, but here is a snippet. He continues:

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding.

Ouch.

As we continue our watch of the Asian/Pacific markets, the Malaysian ringgit has been given the unenviable title of “worst currency” this morning, according to the FT.

Japan’s Nikkei stock index has mounted a slight recovery after dropping 1.5% in early trading Monday, as Asian markets were jolted by the uncertainty created by Greece’s “no” vote in Sunday’s austerity referendum.

The Nikkei 225 was trading down 1.4% at 20256.69, having earlier fallen 339.64 points to 20,200.15, a day after Greece voted to rejected the eurozone’s terms for the country remaining in the single currency.

South Korea’s Kospi was down 0.9% at 2,085.67.

Nils Pratley, the Guardian’s financial editor, says the current crisis has pushed the financial world back to the wild markets of the 2008 financial crisis.

You can read Nils’ analysis in full here, but below is a snippet on bond markets, which he says will take centre stage.

That is where Grexit worries will be keenest. If Greece could be on the way out of the single currency, will investors be less willing to hold the debt of other eurozone states carrying heavy debt loads? The sovereign debt of Spain, Italy, Portugal and Ireland will be closely watched for knock-on effects. Will there be contagion?

All eyes will turn to the European Central Bank. First, to see if it cuts off support for Greek banks. Second, to learn if it is prepared to intervene to protect the bonds of other eurozone stragglers. Last Sunday, when Greek prime minister Alexis Tsipras called the referendum, the ECB and the eurogroup ministers pledged to react, if needed, to avoid a dangerous fall-out in debt markets.

Pratley also makes an interesting point that while the euro will “almost certainly fall in value initially” there is another school of though which says “the single currency would be strengthened in the long run by the departure of its weakest member.”

The Australian stock exchange fell sharply on Monday’s open, not long after the final vote was counted (not that 100% was needed to see the overwhelming response). Below is a graph from the ASX website.

The Australian dollar dipped to a six-year low of US$0.7484 in early trading but has recovered to 0.7509.

The euro, not surprisingly, was down 0.8% at $1.1015 but off an early low of $1.0967. It had initially dropped around 1.5% against the yen – which is seen as a safe haven.

The US dollar also recouped its early drop to be only a touch softer at 122.48 yen.

In a delightfully headlined post, the Financial Times says early moves don’t suggest a panic in the Asian markets. It also notes:

“The hope for Alexis Tsipras, prime minister, is that the vote galvanises support for his anti-austerity agenda and forces Athens’ creditors to make concessions.

But it’s questionable whether banks will re-open on Tuesday (after a holiday today), as planned. If they don’t, the “no” vote could fast-track a Grexit and see Greece revive its only currency.”

Read more from ‘Fast Asia Open: Oxi oxi oxi, oi oi oi’ here.

Mohamed El-Erian, the former boss of the world’s biggest bond trader Pimco and now chief economic adviser at insurance giant Allianz, said investors should brace for a major global equity selloff.

“Yes, you will see one. With the extent and duration a function of whether the ECB steps in with new anti-contagion measures,” he writes for Bloomberg.

“Without huge emergency assistance from the European Central Bank – a decision that faces long odds – the government will find it hard to get money to the country’s automated teller machines, let alone re-open the banks.”

Over to you Mario Draghi.

Eyes are now moving towards the world markets, particularly those in Asia set to open in the next few hours. Tokyo and Korea will be first in the next few minutes and along with Shanghai and Hong Kong later today, are ones to watch.

Unsurprisingly the euro fell sharply in Asia, Reuters has already reported.

The Japanese government said it was ready to respond as needed in markets and was in close touch with other nations.

The euro was down 0.9 percent at $1.1012 but off an early low of $1.0967. It had initially dropped around 1.5 percent on the safe-haven yen only to find a big buy order waiting, which pared its losses to 134.53.

Likewise, the dollar recouped its early drop to be only a touch softer at 122.34 yen. The dollar index added 0.3 percent to 96.434.

Prime minister Alexis Tsipras has addressed the Greek nation, telling voters they made a “brave choice” and that “democracy can not be blackmailed.”

However he added: “I am fully aware that the mandate here is not one to break with Europe by a mandate to strengthen our negotiating position to seek a viable solution.”

Greek voters have overwhelmingly rejected the extra austerity measures demanded by creditors in return for bailout funds. In a referendum held with just eight days notice, more than 60% have voted no, or oxi.

No supporters have taken to the streets in celebration, while Antonis Samaras, the head of the New Democracy party who campaigned for a Yes vote, has resigned.

Shocked EU finance ministers have called an emergency meeting for Tuesday, as analysts fear collapse of the Greek banking system.