George Papandreou, the embattled Prime Minister of Greece, has offered to resign to pave the way for a national unity government, according to various sources, as the Athens parliament prepares to enact more unpopular austerity measures.

The austerity program, which has been demanded by the European Union and International Monetary Fund, presents an array of spending cuts, asset privatizations, tax hikes and job losses, among other items. Greece is under enormous pressure to get its financial house in order after it received a huge bailout last year to reduce its deficit and debt.

The austerity basket envisions $40.5-billion in cuts, to take effect from 2012 through 2015.

A government official told Reuters that Papandreou made the offer to the main opposition party leader, Antonis Samaras, who has been calling for the PM to resign.

However, Papandreou said he would only step down if top lawmakers hammered out a specific framework and fiscal targets for the new government.

He also insisted that any such unity government must support the EU and IMF and their demands of Greek fiscal responsibility.

The conservative opposition replied that any unity government could emerge only if Papandreou quit and terms of the EUI/IMF bailout were re-negotiated.

While Papandreou faces an uphill struggle to gain support for his austerity package, thousands of angry demonstrators and union members staged a huge rally outside parliament in Athens.

One leading member of Papandreou’s Pasok party defected Tuesday in protest of the austerity scheme, leaving the party with a razor-thin majority in parliament. Another Pasok official has vowed to vote against the program.