Greece’s governing Syriza party are “extremists” engaging in “fantasy politics”, a contender for the Labour leadership has said.

Wading into the Greek crisis, Liz Kendall said Labour should not follow the course of left-wing party, which has faced down creditors and EU institutions to reject austerity in the face of international pressure.

"We progressive social democratic parties have to find a credible alternative to the ever-continuing austerity ... on the one hand, and the fantasy politics of Syriza and Podemos on the other," she told an event hosted by the news channel CNBC.

"And that is just as much, I believe, a challenge for the UK Labour party as it is for our sister parties right across Europe.

"We have to find a different alternative, otherwise we will allow the extremists – whether from the left or the right – to come in.”

Liz Kendall at the event, organised by CNBC

She later added: "Trying to turn Labour into some kind of Syriza or Podemos party or simply saying what we’ve said over the past five years – albeit with a leader with a different gender or a different accent – will not cut the mustard."

Ms Kendall is one of four contenders for the leadership of her party, the other three being Yvette Cooper, Andy Burnham, and Jeremy Corbyn.

Yanis Varoufakis resigned as Greece's finance minister on Monday (Getty)

The Labour MP is widely viewed as the candidate most favoured by the centrist or 'Blairite' wing of the party, though she has said she rejects such a label.

Her competitor Mr Corbyn has previously called for Greece’s debt to be cancelled as a “signal to the banks and financiers that we won’t keep bailing them out for reckless lending”.

Ms Kendall’s attack on the Greek government is also in contrast to the approach of the Green Party.

The environmentalists’ MP Caroline Lucas said last week that European authorities had deliberately set out to “humiliate” the country with austerity.

“Austerity isn’t only socially destructive, as we know – it is economically deluded as well. Greece’s government debt to GDP ratio hasn’t gone down as austerity was imposed, it has increased,” she told a crowd in Trafalgar Square,” she told a solidarity demonstration in Trafalgar Square.

In pictures: Greek referendum Show all 28 1 /28 In pictures: Greek referendum In pictures: Greek referendum Greece EU Referendum People celebrate in Athens after the first exit-polls of the Greek referendum Getty Images In pictures: Greek referendum Greece EU Referendum A "No" supporter flashes a victory sign before a Greek flag atop the parliament in Athens, Greece July 5, 2015.Greeks voted overwhelmingly "No" on Sunday in a historic bailout referendum, partial results showed, defying warnings from across Europe that rejecting new austerity terms for fresh financial aid would set their country on a path out of the euro. REUTERS/Yannis Behrakis In pictures: Greek referendum Greece EU Referendum Supporters of the No vote react after the first results of the referendum at Syntagma square in Athens AP In pictures: Greek referendum Greece EU Referendum Supporters of the No vote wave Greek flags after the referendum's exit polls at Syntagma square in Athens AP In pictures: Greek referendum Greece EU Referendum Greece's finance minister Yanis Varoufakis casts his vote in the country's referendum EPA In pictures: Greek referendum Greece EU Referendum A ballot box is emptied by a voting official at the closing of polling stations in Athens, Greece July 5, 2015. Greece voted on Sunday on whether to accept more austerity in exchange for international aid, in a high-stakes referendum likely to determine whether it leaves the euro-currency area after seven years of economic pain. REUTERS/Marko Djurica In pictures: Greek referendum Greece EU Referendum A photographer photographs a man waiting to vote in the referendum at a school in the suburbs of Athens Getty In pictures: Greek referendum Greece EU Referendum Greek voters are being asked to choose between backing their creditor's austerity measures or rejecting them Getty In pictures: Greek referendum Greece EU Referendum Tourists walk past posters with slogans that read “OXI“ (NO) and “NAI“ (YES) ahead of the referendum in Athens AFP In pictures: Greek referendum Greece EU Referendum Opposition parties to Syriza, including the centre-right New Democracy, are campaigning for a ‘Yes’ vote in the referendum Reuters In pictures: Greek referendum Greece EU Referendum Protesters on both sides of the argument ('No' pictured here) have rallied in Athens AP In pictures: Greek referendum Greece EU Referendum Greek Prime Minister Alexis Tsipras has been branded reckless and a feckless liar by EU leaders Reuters In pictures: Greek referendum Greece EU Referendum According to polls which surveyed some 1000 people across the country, 41.5 percent of Greeks would support the new bailout measures to avoid an exit from the Eurozone AP In pictures: Greek referendum Greece EU Referendum Despite Tsipras's assurances, many Greek people are not certain whether Sunday’s referendum is a vote on whether Greece will remain in the euro or not Reuters In pictures: Greek referendum Greece EU Referendum The Greek and EU flags flutter in front of the ancient Acropolis hill in Athens. The Greek people have been called upon to show “calm and national unity” Getty In pictures: Greek referendum Greece EU Referendum Greek Prime Minister Alexis Tsipras addresses a crowd of 25,000 'No' supporters in Athens' Syntagma Square YANNIS BEHRAKIS/Reuters In pictures: Greek referendum Greece EU Referendum Greece’s Prime Minister Alexis Tsipras gave a televised address to the nation ahead of the vote. He has called on voters to reject creditors’ proposals for more austerity in return for rescue loans AP In pictures: Greek referendum Greece EU Referendum Protesters march holding a torn European Union flag during a demonstration for the 'NO' campaign in Thessaloniki Getty Images In pictures: Greek referendum Greece EU Referendum Greek Finance minister Yanis Varoufakis has pledged to resign if his country votes “yes” to the bailout plan Reuters In pictures: Greek referendum Greece EU Referendum Pensioner wait to get their pensions outside a National Bank of Greece branch in central Athens. Banks only opened for pensioners to allow them to get their pensions, with a limit of 120 euros. AFP/Getty Images In pictures: Greek referendum Greece EU Referendum Protesters attend an anti-austerity pro-government rally in front of the parliament building Getty In pictures: Greek referendum Greece EU Referendum The possibility of Greece leaving the Eurozone is increasing by the day. Merchandise already exists to accompany the event EPA In pictures: Greek referendum Greece EU Referendum An elderly man waits to receive his pension outside the closed National Bank of Greece headquarters in Athens AP In pictures: Greek referendum Greece EU Referendum People stand in a queue to use an ATM outside a closed bank in Athens AP In pictures: Greek referendum Greece EU Referendum A banner supporting the NO vote in the upcoming referendum hangs from the offices of the Greek Finance Ministry Getty Images In pictures: Greek referendum Greece EU Referendum Greeks will be asked whether they accept the austerity terms demanded by the country's creditors Getty In pictures: Greek referendum Greece EU Referendum Eurozone finance ministers expressed disappointment at the Greek decision to hold a referendum on the bailout terms Getty In pictures: Greek referendum Greece EU Referendum Alexis Tsipras, the Greek Prime Minister, said bailout conditions had ‘asphyxiated’ his country EPA

“This was never about supporting the people of Greece – it has always been about humiliating and defeating a government which has dared to stand up to the ideology of austerity.”

A poll of Greek voters conducted by the University of Macedonia last month found that Syriza had an 18-point lead over its nearest rival, a dramatic increase in support since its entered government.

A poll taken at the same time in the UK showed Labour 12 points behind the Conservatives a month after a shock election defeat.