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Greece PM Papandreou faces fresh call to resign Greece PM Papandreou faces knife-edge confidence vote
(about 1 hour later)
  
Greece's centre-right opposition has demanded Prime Minister George Papandreou resign, throwing into disarray plans for a unity government. Greece's Prime Minister George Papandreou faces a crucial confidence vote in parliament on Friday with the outcome on a knife-edge.
Opposition leader Antonis Samaras also called for snap elections before leading his MPs in a dramatic walkout of parliament. Mr Papandreou shocked EU partners and sent markets into turmoil after calling for a referendum on a hard-fought EU deal to bail out debt-ridden Greece.
Mr Papandreou's government faces a crucial confidence vote later. While the prospect of a referendum has receded, even if the PM wins his future remains unclear amid new calls to quit.
He earlier said that opposition support could mean dropping controversial plans for a referendum on an EU bailout. The developments have overshadowed a key G20 meeting in Cannes.
The developments in Athens have overshadowed a meeting of the G20 leading economic nations in Cannes, which continues for a second day on Friday. It continues for a second day on Friday.
At the end of the first day, the French host, President Nicolas Sarkozy, said France and Germany had helped Greek politicians focus on what was at stake. Motives questioned
President Obama said the summit's main task was to resolve the eurozone crisis. The figures in the Greek parliament reveal Mr Papandreou's vulnerability.
Summoned to Cannes His governing Socialist party (Pasok) holds a tiny majority - 152 out of 300 seats.
Mr Papandreou had faced a rebellion in his governing Socialist party (Pasok) over the proposed referendum, which sent markets into turmoil. A handful of his MPs had indicated they would refuse to back him in the confidence vote, which is expected late on Friday, possibly around 22:00 GMT.
It was a day of political horse trading and power struggles. George Papandreou realised he was not going to be able to count on the support of his party to get this referendum through. He was facing defeat in Friday's confidence vote in parliament. After fighting calls for his resignation, George Papandreou now faces his next big test: a confidence vote in parliament this evening. It could be tight - very tight. He has a parliamentary majority of just two.
We have been talking to the prime minister's office and they say that George Papandreou has decided to scrap the referendum in the hope of holding his party together. A handful of his MPs had threatened to vote against him if he pursued a referendum on last week's debt deal for Greece. But Elena Panaritis - one of the MPs planning to rebel - told me she would now support the prime minister because, in her view, the referendum will not take place.
It is difficult to say whether he will win the vote or not - it will certainly be on a knife edge. If Mr Papandreou's other dissident MPs follow suit, he could scrape through. Many, though, are speculating that he would still seek to form a national unity government afterwards, possibly to make a dignified exit. But with the opposition leader calling for Mr Papandreou's resignation, any new coalition would presumably need to have another leader at the helm.
But we have learned that whether he wins or loses, negotiations are going to start on putting together a government of national unity. What the result of that will be, we don't know. However, the BBC's Mark Lowen in Athens says there are suggestions some potential rebel MPs will now support Mr Papandreou since the likelihood of a referendum has eased.
The BBC's Gavin Hewitt in Athens says Greece had seen 24 hours of political horse trading and power struggles. There had been serious divisions in Pasok on the referendum, with Finance Minister Evangelos Venizelos insisting it should not be held.
Mr Papandreou's party holds a tiny majority in parliament - 152 out of 300 seats. Mr Papandreou then said the referendum was never an end in itself, and there were two other choices - an election, which he said would bankrupt the country, or a consensus in parliament.
Last week's hard-fought EU deal to bail out debt-ridden Greece was heralded as a breakthrough. He called for talks with the opposition on a coalition government.
But Mr Papandreou threw it into doubt by announcing on Monday that Greece would put the deal - which would mean crushing austerity measures - to a referendum. The strategy of the main opposition New Democracy is unclear.
He was summoned for urgent talks at the G20 summit on Wednesday where the leaders of France and Germany told him that any referendum would turn on the question of whether Greece wanted to stay in the eurozone. Its leader Antonis Samaras on Thursday led his MPs in a dramatic walkout of parliament and called for snap elections.
They also put on hold the next tranche of Greece's existing bailout until after a vote was held. Mr Samaras questioned the motives behind Mr Papandreou's actions.
With Greece's euro membership and its bailout lifeline in danger, Mr Papandreou returned to Athens under mounting pressure to resign.
Reassurance
After a day of turmoil on Thursday, the prime minister told MPs that talks with the opposition on forming a "broader scheme" - apparently meaning a coalition government - should start immediately.
However, an angry Mr Samaras questioned the motives behind Mr Papandreou's actions.
"I am wondering; Mr Papandreou almost destroyed Greece and Europe, the euro, the international stock markets, his own party in order to ensure what? So that he could blackmail me and the Greek public? Or to ensure what I had already said several days ago; that I accept the bailout agreement as unavoidable?""I am wondering; Mr Papandreou almost destroyed Greece and Europe, the euro, the international stock markets, his own party in order to ensure what? So that he could blackmail me and the Greek public? Or to ensure what I had already said several days ago; that I accept the bailout agreement as unavoidable?"
Mr Papandreou told MPs the referendum was never an end in itself, and there were two other choices - an election, which he said would bankrupt the country, or a consensus in parliament. New Democracy MP Simos Kedikoglou told the BBC's World Today programme that while it backed adopting the bailout, that did not mean it supported Mr Papandreou remaining prime minister.
Division within Mr Papandreou's own party was clearly visible when Finance Minister Evangelos Venizelos, addressing Pasok MPs immediately after the prime minister, said Greece must say it was not holding a referendum. So even if Mr Papandreou survives, speculation will mount about his position.
He said Greece should do everything it could to reassure its international partners it would immediately implement the eurozone bailout deal. Government sources told Reuters news agency that Mr Papandreou had agreed at a cabinet meeting on Thursday to stand down once he had negotiated a coalition with the opposition.
One source said: "He was told that he must leave calmly in order to save his party. He agreed to step down. It was very civilised, with no acrimony."
European Commission President Jose Manuel Barroso told the BBC's Today programme he expected a government of national unity to be formed and that the economic problems "will be solved".
He said that it was in Greece's interest to stay in the euro.
"We would like them to stay... in the end it depends on them," he said.
Opinion poll
The G20 will continue its meeting in Cannes on Friday.
The leaders are expected to discuss ways to increase the firepower of the International Monetary Fund (IMF).
At the end of the first day, the French host, President Nicolas Sarkozy, said France and Germany had helped Greek politicians focus on what was at stake.
Mr Papandreou had been summoned for urgent talks at the G20 on Wednesday, where he was told that any referendum would turn on the question of whether Greece wanted to stay in the eurozone.
They also put on hold the next tranche of Greece's existing bailout.
The EU bailout deal, agreed last month, would give the heavily indebted Greek government 130bn euros (£111bn; $178bn) and it imposes a 50% write-off on private holders of Greek debts, in return for deeply unpopular austerity measures.The EU bailout deal, agreed last month, would give the heavily indebted Greek government 130bn euros (£111bn; $178bn) and it imposes a 50% write-off on private holders of Greek debts, in return for deeply unpopular austerity measures.
Analysts say eurozone leaders must solve the Greek problem swiftly or risk the crisis spreading to other vulnerable economies, particularly Italy.Analysts say eurozone leaders must solve the Greek problem swiftly or risk the crisis spreading to other vulnerable economies, particularly Italy.
Although the Greek public has strongly resisted the severe austerity measures a recent opinion poll in a newspaper showed 70% wanted to remain within the eurozone.