Greece's PM George Papandreou
EU and IMF threaten to hold back next tranche of bailout money for Greece.

Following a gruelling seven-hour Cabinet meeting, which ended at 3 a.m. Wednesday local time, government spokesman Ilias Mossialos affirmed that Greek MPs had given their full backing to Prime Minister George Papandreou's controversial referendum initiative. The proposed referendum will be held "as soon as possible," he added.

The support comes after Papandreou sent world markets reeling with his shock announcement that he would be holding a referendum on the EU-instigated Greek bailout plan.

Opposition leaders have been highly critical of the decision, which they say is the prime minister's way of effectively "blackmailing" Greek citizens into accepting responsibility for the current debt crisis, and there were calls Tuesday for Papandreou's resignation.

The proposed referendum, which might yet not take place if the government collapses, will be the first in Greece since the country voted to abolish the monarchy in 1974.

"We will not implement any programme by force, but only with the consent of the Greek people. This is our democratic tradition and we demand that it is also respected abroad," Papandreou told his ministers during Tuesday's meeting.

A referendum "will be a clear mandate, and a clear message within and outside of Greece, about our European course and our participation in the euro," he added.

French President Nicolas Sarkozy and German Chancellor Angela Merkel are due to hold emergency talks Wednesday in a desperate effort to bring stability to the Eurozone and formulate a coherent response to Papandreou's referendum calls. Sarkozy Tuesday urged the Greek prime minister not to implement his controversial plans.

"Giving a voice to the people is always legitimate, but the solidarity of all the Eurozone countries cannot be exercised without everyone consenting to the necessary efforts," he said in a statement Tuesday.