CANNES, France — European leaders said Wednesday they would halt further aid to debt-ridden Greece until the country completes a controversial referendum on the international bailout and signaled that preparations are under way for the possibility that Greece will abandon the euro.
In what they described as a "difficult" meeting with Prime Minister George Papandreou, European leaders and officials from the International Monetary Fund laid down a firm line: He was free to proceed with plans for a nationwide vote, slated for early December, on whether Greece wants to continue under an international emergency program that has demanded stiff austerity measures.
It was the most direct acknowledgment yet by top European leaders that a breakup of the euro is not only possible, but so tangible they need to begin making preparations.
Papandreou's unexpected call for a popular vote has all but taken over the two-day Group of 20 summit of world leaders. The broadly felt fear is that a "no" vote by Greek citizens could prompt the country to default on its international bond payments or pull out of the euro zone, situations European officials and the International Monetary Fund have risked tens of billions of taxpayer dollars to avoid.
If Greek voters reject the latest bailout, "it is going to be a mess," said World Bank president Robert Zoellick, a party to the G-20 talks.
Greece accounts for only about 3 percent of the euro zone's annual economic output. But the default by even a small country, or its exit from the currency region, could reverberate broadly. Contracts and trade deals would get canceled, losses on Greek bonds would ripple through the banking system and investors would worry that other indebted European nations would follow suit.
The European leaders said they would speed implementation of current crisis-fighting plans so they will be ready for any outcome in the Greek vote.
"We wish to continue building the euro with our Greek friends, but there are certain rules," French President Nicolas Sarkozy said at a late-evening news conference. "It is up to the Greeks whether they want to continue on this road."
Appearing at his side, German Chancellor Angela Merkel said that Papandreou's unexpected decision to put the new crisis plan to a popular vote had caused such a deep "psychological change" that European officials felt it necessary to draw a line and demand a quick resolution to the sudden uncertainty.
Papandreou did not appear with them, but he said after the meeting that he believed that "the Greek people are wise and will make the right decision." He expressed confidence that the vote will build national unity to take on the economic reforms and other changes needed to continue with an international rescue program and stay with the euro.
His grip on power in doubt, Papandreou came here to plead his case that only with a proven popular mandate could he proceed with the tough austerity and reform measures being asked in return for a new slate of international loans and debt relief.
The latest bailout plan for Greece includes more than $100 billion in debt relief and perhaps $150 billion in new international loans but is being viewed by some in the country as a recipe for more years of austerity and extensive monitoring by international officials.
The situation is being watched closely by U.S. officials who for months have pressed European leaders to move more forcefully on their debt and financial crises, only to watch the region's halting, step-by-step approach allow the problem to worsen and threaten major economies, including Italy's. The administration is holding bilateral talks with European leaders as part of the summit but has been hesitant to wade too deeply into what has become a complex European political negotiation.
The United States has an important role to play in helping guide Europe through its financial crisis, but it is ultimately Europe's problem to solve, the White House said Wednesday. President Barack Obama left for the summit Wednesday evening.
With Greece at the focal point, the G-20 leaders are also struggling with the worrisome fact that the euro region as a whole appears to be slowing, a potential blow to the world economy. Collectively, the euro-region economy is about the same size as that of the United States, and a new recession there would mean slower growth in the United States and China as well.