Merkel, Sarkozy give Greece ultimatum on euro

The leaders of Germany and France told Greece on Wednesday it would not receive another cent in European aid until it decides whether it wants to stay in the euro zone.

They also made clear that saving the euro was ultimately more important to them than rescuing Greece.

After emergency talks with Greek Prime Minister George Papandreou, German Chancellor Angela Merkel said: "We would rather achieve a stabilisation of the euro with Greece than without Greece, but this goal of stabilising the euro is more important."

French President Nicolas Sarkozy hammered home the same message, telling a joint news conference with Merkel: "Our Greek friends must decide whether they want to continue the journey with us."

Papandreou outraged European partners and caused panic on financial markets by announcing on Monday that Greece would hold a referendum on a second bailout plan negotiated with euro zone leaders last week.

The Greek leader, looking chastened after a torrid dinner with European Union decision-makers that Merkel called "tough and hard" on the eve of a summit of G20 major world economies, said the plebiscite would take place around Dec. 4. "It's not the moment to give you the exact wording, but the essence is that this is not a question only of a programme, this is a question of whether we want to remain in the eurozone," Papandreou said.

Despite opinion polls showing a majority of Greeks, weary of two years of deepening austerity, think the bailout package was a bad deal for Greece, he said he expected more support from the wider population than he could muster in parliament. "I believe the Greek people are wise and capable of making the right decision for the benefit of our country," he said.

Sarkozy and Merkel said euro zone finance ministers would meet next Monday to speed up decisions on leveraging the euro zone's rescue fund to build a firewall to protect other weaker members of the 17-nation currency area.

The EU and IMF 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 leader sent a letter to EU leaders saying he wanted to negotiate the details of the second package before the referendum, they said. The letter angered European officials, raising the level of mistrust towards Greece.

Papandreou said Greece had enough money to keep running until mid-December, when it has to redeem more than 6 billion euros in debt.