The EU gave Greece 24 hours on Sunday to explain how it will form a unity government to enact a bailout agreement, and Prime Minister George Papandreou said he did not want to lead it, the closest he has come to meeting opposition calls to go.
Papandreou and his opponents have been scrambling to hammer out a deal for a unity government ahead of a meeting by finance ministers of euro countries on Monday, to show that Greece is serious about taking steps needed to stave off bankruptcy.
The sides have been deadlocked on how long the unity cabinet would serve before elections, and who would lead it.
Papandreou said no deal had yet been struck with the conservative opposition, despite calls from Brussels for urgent progress on backing the 130 billion euro rescue package.
It is clear that this government will pass the baton but it will not pass it to a void -- it will pass it to a new government, if we agree on it, and I hope this will happen soon. And when I say soon, I mean today, not tomorrow, he said in the text of remarks to his cabinet, released to the media.
I'm not interested in being prime minister in the new government, Papandreou added.
The EU has made clear it wants a unity government in Greece to ensure consensus support for reform and restore confidence after a week that saw Papandreou first call for a referendum on the bailout and then backtrack under international pressure.
European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters that finance ministers from countries that use the single currency would insist on hearing a plan for a unity government from their Greek colleague Evangelos Venizelos at Monday's meeting in Brussels.
We have called for a national unity government and remain persuaded that it is the convincing way of restoring confidence and meeting the commitments, he told Reuters. We need a convincing report on this by Finance Minister Venizelos tomorrow in the Eurogroup.
TWISTS AND TURNS
As Greece's political drama twisted and turned by the hour, Papandreou and conservative opposition leader Antonis Samaras met the president for talks on Sunday evening. This followed a request from the prime minister for a three-way meeting to explore the possibility of an agreement.
Everything must be done within the day, otherwise tomorrow it will be hell, said Telemachos Hitiris, a senior lawmaker in Papanderou's socialist party PASOK.
Any new coalition will have three immediate tasks: pushing the euro zone bailout through parliament, completing a bond swap which will halve the value of private creditors' Greek state debt holdings, and passing the 2012 budget.
But it is likely to govern for only a few months, too short a time to finish carrying out reforms demanded by the EU and IMF to make the Greek economy more efficient and competitive.
Earlier, the conservative opposition offered to cooperate in forming a national unity government provided that Papandreou stood aside after two years at the helm.
A BREACH OF CONFIDENCE
In a telephone interview, Rehn said Papandreou's proposed referendum had breached confidence with Greece's euro zone partners and put Athens on a path towards leaving the common currency, but Greece now appeared to be pulling back from the brink.
Papandreou had sought the referendum to show that harsh cuts demanded in the bailout had public support, but the risk that a no vote could bring about a sudden bankruptcy caused mayhem in markets and defections in the ruling party, plunging his country into political as well as economic crisis.
Under heavy pressure from home and abroad, Papandreou ditched the referendum and narrowly survived a confidence vote, but only after promising to seek a new broad-based coalition.
Early on Sunday, the left and right had seemed far apart and any coalition deal between Papandreou's PASOK socialists and the conservative New Democracy a distant prospect.
But the EU pressure appeared to start working. With the cabinet due to meet later on Sunday, Hitiris said explicitly what Papandreou had signalled in parliament on Friday.
Papandreou will resign once the new prime minister is selected, he told state NET TV. We only have to wait for the prime minister's announcements in the cabinet.
TORTURING THE GREEK PEOPLE
In the hunt for a national consensus, President Karolos Papoulias met Samaras, who heads the New Democracy party earlier on Sunday. This uncertainty that is torturing the Greek people must end. We must find a solution, Papoulias said.
Samaras said he was ready for compromise but only with a new prime minister. I am determined to help. Provided that Papandreou resigns, everything will take its course, he said after the talks.
The bailout deal aims to save Greece from bankruptcy and to prevent its problems tipping much bigger euro zone economies such as Italy and Spain into full-blown crisis.
Greeks have staged strikes and protests, some of them violent, against pay and pensions cuts, combined with higher taxes, demanded by the international lenders.
But the state is due to run out of money in December, when it has big debt repayments to meet, and by then needs the sixth, 8 billion euro, instalment of its existing EU/IMF bailout package. Germany and France have said it will not get a cent unless it has signed on to the new bailout terms.
A senior New Democracy official said Samaras was willing to negotiate a government of politicians, rather than one comprising technocrats, if Papandreou stepped aside. Party sources said he was under pressure from his own lawmakers, who feared the consequences if they were left out of a coalition.
Having demanded snap elections, he might be willing to discuss a date later than his preferred early December vote.
The source made no mention of who might lead the government but New Democracy is unlikely to accept any top member of the ruling PASOK party such as Venizelos.
(Additional reporting by Lefteris Papadimas, Rene Maltezou and Harry Papachristou; Writing by David Stamp; Editing by Peter Graff)