The leaders of France and Germany say Greece will receive no more European bailout aid until it has put an end to uncertainty and agreed to meet its commitments to the euro zone.
Senior European Union leaders held talks with Greek Prime Minister George Papandreou in Cannes on Wednesday.
President Nicolas Sarkozy of France said Greece must decide whether it wants to work with the rest of Europe.
EU leaders were angered by Mr Papandreou's surprise decision to hold a referendum on a 130 billion euro bailout deal reached with euro zone leaders at a summit last week. That poll could come as early as 4 December.
The next 8 billion euros in rescue loans will be withheld from Greece until after its referendum on the eurozone rescue plan. It was originally to be released in the middle of November.
Chancellor Angela Merkel said Germany wants to stabilise the euro zone with Greece as a member, but stabilising the euro is ultimately more important than rescuing Greece.
Mr Sarkozy said if a referendum is held, it should be on whether Greece stays in the euro zone or leaves, and Europe could not endure a long period of uncertainty.
The referendum is due to be held on 4 or 5 December.
Mrs Merkel said the vote is over whether Greece wants to stay in the eurozone.
She said Mr Papandreou has accepted that all political parties in Greece would have to strive for a 'yes' vote in the referendum.
She said it should be held quickly and should give Greek voters a simple choice of staying in the eurozone or not.
Meanwhile, the Italian government has approved a package of economic measures to tackle its growing financial crisis.
Details of the measures have not yet been released but the country has been under intense pressure to show it can bring its finances under control.
