German Chancellor Angela Merkel and French President Nicholas Sarkozy will hold an emergency meeting ahead of the G20 summit in Cannes in the wake of Greek Premier George Papandreou's surprise referendum call on a proposed EU rescue package that re-ignited the euro zone debt crisis and triggered new turmoil in the financial markets.
The two leaders hurriedly organised a meeting ahead of the G-20 summit on Tuesday amid concern that the euro zone is heading for a long period of uncertainty and if the Greek voters rejected the rescue package, it will have far-reaching consequences for the stability of the euro and the nations using the single currency.
Merkel and Sarkozy during a telephone conversation on Monday reaffirmed their determination to ensure with their partners the full implementation of a comprehensive package of measures agreed by the EU leaders at their summit in Brussels last week to contain the debt crisis.
They agreed that a 'full and speedy implementation of those decisions are more necessary now than ever,' the German government said in a press statement.
Germany and France are convinced that the European Union's new financial aid package for Greece will help it to return to sustainable growth, Merkel and Sarkozy said.
They expressed the hope that a time plan for the implementation of this agreement will be worked out shortly in cooperation with its European partners and the International Monetary Fund.
They have invited Papandreou to join them in Tuesday's meeting and hoping that the Greek prime minister could be persuaded to give up his referendum plan, which was announced on Monday, media reports said.
Luxembourg's Prime Minister and chairman of the Euro group Jean-Claude Juncker, European Commission President Jose Manuel Barroso, European Council president Herman Van Rompuy, managing director of the International Monetary Fund Christine Lagarde and newly-appointed president of the European Central Bank Mario Draghi also are expected to attend.
European governments and politicians reacted with shock and bewilderment to Papandreou's announcement to hold a referendum on the second rescue package just five days after the EU leaders reached a deal on a new strategy to prevent the debt crisis spreading to larger economies such as Italy and Spain.
They expressed fears that deal could fall apart if the Greek voters rejected the rescue package.
Greece will have to implement further spending cuts, slashing of pensions and wages and job cuts of several thousand civil servants in return for the assistance from EU.
Greece has been facing a wave of violent anti-government demonstrations in protest against the government's austerity measures and the Greek public strongly oppose further spending cuts.
More than 60 per cent of the voters are against the new rescue package, according to opinion polls.
Papandreou gave no date for the proposed referendum, but said it could be held within the next few weeks when details of the new rescue package are available.
The EU leaders had reached a deal with European banks last Thursday to write down 50 per cent of Greece's debts as part of the second bailout package of 100 billion euros on top of a 110 billion euro rescue package it received from the EU and the IMF in May, last year.
The EU leaders also agreed to leverage the lending capacity of the euro zone bailout fund, the European Financial Stability Facility from Euro440 billion to Euro 1 trillion and to strengthen the capital structure of European banks by raising over 100 billion euros fresh capital by June, next year.
As long as the uncertainty about the proposed referendum remains, it is very unlikely that Greece will receive the next tranche of 8 billion euros from the first rescue package, which is urgently needed to avert a bankruptcy.
The Euro zone finance ministers had agreed to release the latest instalment at their meeting in Brussels last week.
But, several leading European politicians demanded the EU to freeze the assistance until it becomes clear that Greece will implement the conditions attached to it.
Juncker criticised Papandreou for announcing his decision to hold a referendum without consulting his European partners.
He also warned about the consequences of the proposed referendum.
If the Greek people voted against the second rescue package, a bankruptcy of the country cannot be ruled out, he said in an interview.