Germany and France pressed Greece on Wednesday to make up its mind fast whether it wants to stay in the euro zone after a shock decision to call a referendum on an EU/IMF bailout caused panic on global markets.
French President Nicolas Sarkozy and Germany's Angela Merkel summoned George Papandreou for emergency talks with top European Union officials in Cannes on the eve of a summit of the G20 major world economies that has been upstaged by the surprise Greek move.
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Paris and Berlin said they would push the Greek Prime Minister for rapid implementation of measures to tackle the currency area's debt crisis that Athens has thrown into doubt.
Papandreou made no comment on arrival for a dinner at which he was expected to hear Europe's anger at his unilateral decision to call a public vote without informing the EU partners who are aiding his debt-stricken country.
The French and German leaders met first with the heads of EU institutions and the International Monetary Fund to discuss how to limit the damage from the Greek decision and apply pressure for a swift outcome.
EU and IMF board sources said Greece would not receive an urgently needed 8 billion euro aid instalment, due this month, until after the vote because official creditors wanted to be sure Athens would stick to its austerity programme.
European Commission President Jose Manuel Barroso delivered this message to Papandreou before his arrival in Cannes, EU sources said.
This was after the Greek prime minister sent a letter to EU leaders saying he wanted to negotiate the details of the second package before the referendum. The letter angered European officials, raising the level of mistrust towards Greece.
Hours before the crunch meeting in the building that hosts the annual Cannes film festival, French Prime Minister Francois Fillon told parliament: "Europe cannot be kept waiting for weeks for the outcome of the referendum.
"The Greeks must say quickly and without ambiguity whether they choose to keep their place in the euro zone or not."
German Chancellor Merkel struck the same tone of exasperation and impatience as Fillon before flying to Cannes.
"We agreed a plan for Greece last week. We want to put this plan into practice, but for this we need clarity and the meeting tonight should help with precisely this," she said.
Opinion polls suggest most Greeks think the 130 billion euro ($178 billion) deal thrashed out by euro zone leaders last week is a bad one.
But much will depend on how Papandreou frames the debate, either on the bailout -- and the painful cuts it demands -- or membership of the euro, which remains popular.
A Greek government spokesman said the referendum would be about the bailout deal, not staying in the euro. But another government source said the subject and timing of the vote would only be decided on Papandreou's return from Cannes.
French officials said Papandreou would be pressed to put the bailout deal to parliament before the referendum, in hopes of reassuring financial markets, and to hold the plebiscite by mid-December to avoid months of uncertainty.
A German Finance Ministry spokesman said Greece apparently had enough money to keep running until mid-December, when it has to redeem more than 6 billion euros in debt.
WEEKS OF UNCERTAINTY
Sarkozy's office said several euro zone leaders attending the G20, including the Spanish and Italian prime ministers, would meet on Thursday morning in Cannes.
In fresh signs of the market turmoil unleashed by the Greek move, the euro zone's EFSF rescue fund, which lends money to troubled member states, was forced to put on hold plans to raise 3 billion euros in the bond market.
And Italy's financial stability panel said some Italian banks were having difficulty raising money on international markets.
Asian G20 members piled pressure on Europe to tackle the crisis before it wreaks serious harm on the world economy.
China's deputy finance minister, Zhu Guangyao, said he hoped the uncertainty over the Greek referendum could be contained, adding that Beijing could not consider investing more in the euro zone's bailout fund given the lack of detail on proposals to leverage it.
South Korean President Lee Myung-bak said the G20 must act swiftly and boldly to contain the crisis, which was spilling over to the rest of the world.
Win or lose, Papandreou's gamble guarantees weeks of uncertainty just as the 17-nation European currency area is desperate for a period of calm to implement the remedies agreed to corral its sovereign debt crisis.
Some in Papandreou's party called for him to quit, accusing him of endangering euro membership with his shock decision to call a popular vote, a move that pummelled the euro and stocks.
The Socialist prime minister battled late into the night to win cabinet support, giving him at least a stay of execution before a confidence vote in parliament on Friday.
"The referendum will be a clear mandate and a clear message inside and outside Greece on our European course and participation in the euro," Papandreou told a seven-hour cabinet meeting that ended early on Wednesday.
European Commission chief Jose Manuel Barroso urged Greeks to unite in support of the bailout plan, warning that the alternative would be too ghastly to predict.
"Without the agreement of Greece to the EU/IMF programme, the conditions for Greek citizens would become much more painful, in particular for the most vulnerable. The consequences would be impossible to foresee," he said.
If Papandreou loses the vote, Greece faces a disorderly default which would hammer Europe's banks and threaten the much larger economies of Italy and Spain, which the bloc may not have the means to bail out.
The chairman of euro zone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the bailout package and Japanese Finance Minister Jun Azumi said: "Everyone is bewildered."
Juncker, Barroso, European Council President Herman Van Rompuy, IMF chief Christine Lagarde and a senior European Central Bank official attended Wednesday's talks in the southern French resort town.
ECB IN SPOTLIGHT
Doubt about Europe's ability to contain the debt crisis has once more sent markets into a spin and put Italy firmly in the firing line.
The risk premium on Italian bonds over safe-haven German Bunds hit a euro-lifetime high on Tuesday, despite European Central Bank buying of its bonds.
Italian Prime Minister Silvio Berlusconi scrambled to come up with measures to placate markets, holding an emergency cabinet meeting to accelerate budget reforms amid mounting calls for his resignation.
Ireland's finance minister said the ECB would be forced to pledge "a wall of money" to buy bonds, something many of its policymakers are deeply uncomfortable about.
Until the Greek situation is clearer, last week's package of measures is likely to be in limbo, leaving the ECB as the only bulwark against market attacks.
The head of Germany's banking association, Michael Kemmer, said agreement on a 50 percent writedown of Greek debt by its private creditors would have to wait. "I can't imagine a debt exchange taking place before the referendum," he said.
But the man representing banks in the negotiations on a "voluntary" writedown, Charles Dallara of the Institute of International Finance, said it was continuing to work on technical details of the plan.
Greek Conservative opposition leader Antonis Samaras said Papandreou had acted as a one-man roadblock.
"How can banks accept a haircut on their debt if they don't know if Greece accepts it in the first place?" he told lawmakers in a speech. "Papandreou has put the country in the centre of a global storm ... a government in such a state of panic is dangerous and must leave as soon as possible."
Greek government spokesman Ilias Mosialos said the referendum would take place "as soon as possible, right after the basics of the bailout deal are formulated".
Greek officials had suggested it would probably be held in mid-January but the interior minister said it could happen as early as December.
The Greek press, including dailies traditionally friendly to the government, almost unanimously condemned Papandreou.
Centre-left newspaper Eleftherotypia described the prime minister on its front page as "The Lord of Chaos". Ethnos, another pro-government paper, called the referendum "suicidal".
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