The leaders of France and Germany have said that Greece will receive no more European bailout money until it has put an end to uncertainty and agreed to meet its commitments to the eurozone.
French President Nicolas Sarkozy made the announcement after talks with Greek Prime Minister George Papandreou in the city of Cannes tonight.
"The Greeks have to decide whether to continue the adventure with us or not," Mr Sarkozy warned. "We hope to continue with the Greeks, but there are rules that have to be respected.
"The Europeans and the IMF can't release the sixth tranche of loans to Greece until Greece endorses the package of 27 October," Mr Sarkozy said, calling for the referendum "if one is needed" to be carried out swiftly.
If the provisions of the loan agreements are not respected "neither Europe nor the IMF can release even a further cent."
German Chancellor Angela Merkel said that stabilising the euro was ultimately more important than rescuing Greece.
The emergency meeting was called after Mr Papandreou announced on Monday that he would hold a referendum on the EU/IMF bailout.
Greece's euro membership is at stake in the referendum, Mr Papandreou admitted.
"The essence in this is not the question only of a programme, this is a question of whether we want to remain in the eurozone. That's very clear," he said.
Before the meeting, the President of the European Commission, Jose Manuel Barroso, warned that the consequences of a rejection by Greeks of the rescue deal were impossible 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," Barroso said as he arrived in Cannes.
Ms Merkel has called on Mr Papandreou to provide clarity on how his proposed referendum would impact the EU/IMF debt rescue deal for his country.
Speaking before leaving Berlin for Cannes, Ms Merkel said that Europe wanted to implement the plan to buttress Greece's finances that was worked out only last week, but clarification was needed tonight.
"For us, it is actions that matter. We agreed a programme with Greece last week. And from the EU side, at least for Germany, we want to implement this programme," Ms Merkel told reporters.
"For this, we need clarity and that's what these talks tonight are about," she added.
French Prime Minister Francois Fillon said that Athens must say quickly if it wanted to keep the euro.
Greek cabinet backs proposal
The Greek cabinet last night backed Mr Papandreou's proposal for the referendum.
A spokesman said the cabinet had expressed its support and the referendum will take place as soon as possible, after the basics of the bailout deal are formulated.
Some ministers leaving the seven-hour cabinet meeting said they had expressed criticism of the decision but decided to support the government ahead of a key confidence vote in parliament.
Earlier, Mr Papandreou said he was proceeding with the referendum.
In a statement, he said the referendum will be a clear mandate and a clear message, in and outside Greece, on the country's participation in the euro.
He said he believed market turmoil triggered by his unexpected announcement on Monday night would be short-lived.
The head of Taiwan's Central Bank said the referendum proposal was akin to "throwing a bomb into the financial market."
A spokesperson for US President Barack Obama said the uncertainty caused by Greece's move showed the need for rapid implementation of the eurozone deal.
Ahead of the meeting in Cannes tonight, Mr Sarkozy said the announcement of a Greek referendum surprised all of Europe.
"Giving the people a say is always legitimate but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts."
Investor surprise at the Greek announcement led to shares falling in value in overnight trading on Asian markets echoing a sharp decline on Wall Street last night and on European exchanges yesterday.
The drop has wiped out all gains made during the relief rally last week that followed the bailout annoucement agreed at the eurozone summit in Brussels.