ATHENS, Greece?? Greece's prime minister on Thursday abandoned his explosive plan to put a European rescue deal to popular vote, amid reports he has struck a deal with ministers to step down and hand power to a negotiated coalition government if they help him win a confidence vote on Friday.
Government sources with knowledge of a cabinet meeting told Reuters the ministers involved in the deal were led by Finance Minister Evangelos Venizelos.
"He was told that he must leave calmly in order to save his party," one source told Reuters on condition of anonymity. "He agreed to step down. It was very civilized, with no acrimony."
The report could not immediately be verified.
Passionate squabbling in Athens left the country's solvency in doubt and the eurozone in turmoil.
Papandreou reversed course over the referendum after a rebellion within his own Socialist party.
Meanwhile, Greece's cost of borrowing ballooned, with the interest demanded by markets to buy Greek 10-year bonds exceeding 31 percent ? compared to 2 percent for European powerhouse Germany.
Video: Europe?s crisis threatens world economy (on this page)
Papandreou sparked a global crisis Monday when he announced he would put the latest European deal to cut Greece's massive debts ? a hard-fought accord that took months of negotiations ? to a referendum. The idea horrified other EU nations, Greece's creditors and financial markets as investors fretted over the prospect of Greece being forced into a disorderly default.
Papandreou was summoned to an emergency European meeting in Cannes, France, on Wednesday night, where the visibly irate French and German leaders said any referendum would in fact be a question of whether Greece retains its cherished membership of the 17-nation euro common currency. They also put on hold the next, vital payout of Greece's existing bailout until after a vote was held.
A Greek Finance Ministry official told the AP that Greece has cash until mid-December. After that, without the ?8 billion ($11 billion) disbursement, Greece would most likely be unable to service its debt or pay pensions and salaries.
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Venizelos accompanied Papandreou to the Riviera but led a revolt against the referendum idea on his return to Athens before dawn Thursday.
With Greece's euro membership and bailout loan lifeline suddenly in danger, pressure mounted for Papandreou to resign. The conservative opposition and even his own deputies called for the creation of a transition government to pass the new European debt deal.
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Venizelos said, as the opposition now indicated it would support the European debt deal, a referendum was no longer necessary.
"The government went to Cannes with the position that if the necessary consensus is formed there will be no need to hold a referendum," he said. "We must highlight the fact that there is a window of a consensus."
He said the new debt deal would be brought to parliament under a procedure that would require a reinforced majority of 180 out of the 300 lawmakers to vote in favor. With the governing Socialists holding 152 seats, that means the debt deal will only pass if the opposition also votes in favor.
But conservative opposition leader Antonis Samaras quickly dispelled any impression of unity, arguing that he had already agreed to back the vital deal, and demanded elections ? within the next six weeks if possible.
Europe's deepening crisis threatens U.S. economy
Papandreou "nearly pulled the universe apart to supposedly persuade me to agree to something that I had already said was unavoidable," he told parliament later Thursday, during a debate on the upcoming confidence vote.
"Mr. Papandreou pretends that he didn't understand what I told him," he said. "I called on him to resign."
Samaras then led his lawmakers in a dramatic walkout of the debate, without indicating whether he would vote in favor of the deal.
The drama in Greece sent immediate ripples throughout Europe. Premier Silvio Berlusconi's government in Italy was teetering as well Thursday after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout. The European Central Bank made a surprise decision to cut interest rates by a quarter of a percentage point, to 1.25 percent, in an acknowledgment of the fragility of the continent's finances.
Talk of Greece also dominated the G-20 summit in the French resort of Cannes, where the leaders of the world's economic powerhouses gathered to solve Europe's debt crisis, which threatens to push the world back into recession.
During a summit break, French President Nicolas Sarkozy praised the Greek opposition's backing for the debt-crippled country's new bailout as "courageous and responsible."
Greece's new debt deal would give the country an extra ?130 billion ($179 billion) in rescue loans from the rest of the eurozone and the International Monetary Fund ? on top of the ?110 billion ($152 billion) it was granted a year ago. It would also see banks forgive Athens 50 percent of the money it still owes them. The goal is to reduce Greece's massive debts to the point where the country is able to handle its finances without constant bailouts.
Polls indicate the Greek public is close to the breaking point after more than 20 months of harsh austerity cuts and tax hikes. Recent opinion surveys show 90 percent opposing Papandreou's policies and his party polling just 20 percent public support.
Underlining that point, 300 people held a peaceful anti-austerity protest in central Athens late Thursday
The political drama continues Friday, when parliament will hold a confidence vote on the government. Papandreou's majority has been reduced to the bare minimum 151 after Socialist lawmaker Eva Kaili said she would not vote in favor.
"Tomorrow's vote is of particular significance, for the confidence vote provides a guarantee of how we will make our new steps ... and how we will talk with the opposition parties," Papandreou said.
The omens are poor: The two other European governments besides Greece that have received bailouts ? Portugal and Ireland ? have seen their governments fall during the economic turmoil.
Reuters and The Associated Press contributed to this report
Source: http://www.msnbc.msn.com/id/45144746/ns/world_news-europe/
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