Any policy changes will have to be approved by parliament and the Schengen zone governments.
The Schengen zone covers 22 EU states and three non-EU countries - Iceland, Norway and Switzerland.
Since 19 December 2009, its citizens have not needed visas to visit most EU countries - those in the Schengen zone.
Most EU countries, and some others including Switzerland and Norway, are in the Schengen zone, where border controls for those countries' citizens are minimal or non-existent.
Germany says it will not allow Bulgaria or Romania to join the EU's passport-free Schengen zone if the issue is put to a vote in the EU on Thursday.
Germany said on Sunday it would veto any attempt to allow Bulgaria and its neighbour Romania to enter the passport-free Schengen zone when EU ministers discuss the issue later this week.
Eight of them (Romania and Bulgaria are the exceptions) have already joined Europe's Schengen passportless travel zone.
Sanctions could include cutting funds, extending the monitoring of the judicial system or blocking membership of the Schengen passport-free zone.
Over the past year the Danish, French and Italian governments have rolled back the Schengen passport-free zone and reintroduced limited border controls.
Mr Tusk just about accuses his fellow EU leaders of hypocrisy for talking of integration and yet undoing the Schengen passport-free zone by reimposing some border controls.
In September 2010, the EU again called on Bulgaria to take urgent action to tackle crime and corruption, and later in the year France and Germany announced that they would block Bulgaria from joining the Schengen passport-free zone until the country had made "irreversible progress" in this area.
Apart from withdrawing yet more funds, the EU could also delay Bulgaria's accession to the Schengen visa-free travel zone, planned for 2011-12.
Another big task is meeting European Union worries about the rule of law, which are holding up Romania's accession to the Schengen passport-free travel zone.
The Eurosceptics argue that Iceland already gets most of the benefits of full membership through existing free trade arrangements with the EU and by being part the Schengen visa-free travel zone.
It is hard to see what concessions might turn a No into a subsequent Yes: the only conceivable new opt-out is from the Schengen frontier-free travel zone, and that would break up the long-established Nordic passport union.
ECONOMIST: Denmark and the European Union: Still an odd man out? | The
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