Warning for Greece over euro future

German Chancellor Angela Merkel says Europe needs to tackle its debt crisis, with or without Greece.

Chancellor Merkel was speaking after meeting with Greek Prime Minister George Papandreou, French President Nicholas Sarkozy and officials from the EU and IMF in Cannes tonight on the eve of a G20 summit.

They were looking for an explanation from Mr Papendreou as to why he has decided to a hold a snap referendum on the proposed bailout for his country.

It looks as though this vote could be held in just over a month's time, on December 4.

But, at a press conference held after the meeting, President Sarkozy reiterated that the referendum the Greeks really need to hold is whether or not they want to remain on as a member of the Eurozone.

Chancellor Merkel said Europe can cope if Greece decides to pull out of the euro.

Greece was also warned it will not be handed the next €8bn tranche of bailout money due this month unless there is a yes vote in the referendum.

At a separate press conference, Mr Papandreou said the Greek people are wise, and they can be trusted.

"A positive decision by the Greek people is not only a positive decision for Greece, it is a positive decision for Europe," he said.

Meanwhile the Italian government has agreed to introduce a package of economic reforms aimed at easing pressure from nervous markets.

The move comes a day after the Italian stock market suffered its worst losses since the beginning of the global crisis, back in 2008.

The details of these measures are still unknown but it is likely the Italian Prime Minister Silvio Berlusconi will share the content of the reforms at the summit of G20 leaders in Cannes which formally begins tomorrow.