The scientific and policy relevance of the water-energy nexus in the power system is expected to increase in the future due to climate changes. The operation of the power system is constrained by the availability of water resources, which are necessary for hydropower generation and cooling thermal power plants. At the same time, water availability for non-energy purposes is affected by the power system requirements. In order to analyse this complex interdependency, this paper proposes an interdisciplinary modelling framework including the link of a hydrological model (LISFLOOD) and a power system model (Dispa-SET) within the WATERFLEX project, which aims at assessing the potential of hydropower as a source of flexibility to the European power system, as well as analysing the water-energy nexus against the background of the European Union initiatives towards a low-carbon energy system. Specifically, this paper focuses on the power system model used in WATERFLEX, which encompasses a medium-term hydrothermal coordination model (Dispa-SET MTHC) and a unit commitment and dispatch model (Dispa-SET UCD). The proposed approach is applied to the Greek power system to analyse the implications of different hydrological historical scenarios on the power system operation and economics, as well as the effect of the power system operation on the water availability. For this case study, this paper quantifies the generation costs, the environmental impacts, the water consumptions and withdrawals, as well as the water stress at different power plant locations throughout a year.