German Chancellor Angela Merkel and French President Nicolas Sarkozy have given the Greek Prime Minister, George Papandreou, a stark ultimatum - accept the austerity deal or leave the eurozone.
Following emergency talks at the G20 meeting in Cannes, the German and French leaders reiterated their desire for Greece to stay within the eurozone, but said that if Athens is to go ahead with the referendum, the question should be whether or not the country is to remain as a eurozone member.
They added that no more money would be given to Greece until after the referendum, which is likely to be held on 4 December.
Striking a serious tone, Sarkozy emphasised the importance of implementing the agreed rescue plan for the euro.
"It is not up to us to tell Greece what to do. We are not asking for anything other than Greece obeys the rules. It is up to them whether they accept the rules or not. There is not enough leadership [in the eurozone]. This is not a pleasant situation to be in but this is where we are."
Equally staid, Merkel said the eurozone as a whole needs a "coordinated response".
“The desire of the eurozone is to help Greece,” she said.
"The psychological situation has changed due to Greece's referendum. The Greeks decided to hold this referendum without warning. But we will not abandon principles of democracy. We cannot put at stake the great work of unification of the euro."
“In the end it is a question of whether Greece wants to remain in the eurozone with the euro currency – that is the issue.”
Speaking after the joint French and German press conference, Papandreou said the outcome of the referendum is "crucial for Greece".
"I believe in the eurozone,” he said. “I believe in the benefits… This decision [of the referendum]... will change the future of generation.”
He conceded that there are many within Greece that disputed the positive aspects of eurozone membership. As such, it is “important that the Greek people have a say in making these important decisions,” he said.
“We are a part of the eurozone, we are very proud to be part of the eurozone. With it we have many rights but also many obligations. It is crucial we show the world we can live up those obligations.”
“I believe that the Greek people are wise and capable of making the right decision for the benefit for our country," he added. "A positive decision is no only a positive decision for Greece but for Europe."
The Greek prime minister refused to give the exact wording of the referendum, but confirmed that it was not just the question of the bailout, but whether the country wants to remain in the European project.
Papandreou was summoned to the emergency meeting at the G20 summit in France On Tuesday following the surprise announcement from Athens of a referendum on the austerity cuts.
Throughout Wednesday, the French and German leaders were at pains to hide their anger at Papandreou’s decision.
Merkel said she wanted “clarity” from Greece on its position, while Sarkozy said he wanted to know "the conditions under which the engagements undertaken will be kept".
Eurozone chairman, Jean-Claude Juncker, struck a similar tone: "We took a decision last week as 17 (member states), we can't allow anyone to disassociate himself from that decision."
Earlier, Sarkozy met with the Chinese President Hu Jintao in the hope of agreeing financial assistance from China €2.3 trillion in foreign exchange reserves.
However, speaking on Sky News, former chancellor Alistair Darling said he thought China would not come to the rescue, adding that the current crisis “has every risk of spilling back into the banking system.”
“It is very, very serious and they need to get a grip on it,” he said.
Papandreou’s surprise decision to call a referendum on the austerity cuts imposed by the European leaders as part of the agreed bailout package has left the Eurozone on the brink of collapse.
The fate of the Eurozone project looked further in doubt after the Greek cabinet approved a decision to hold a referendum on the €130bn (£112bn) bailout package for the country agreed less than a week ago.
The two-day G20 meeting formally starts on Thursday.
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