Greek Prime Minister George Papandreou faces a knife-edge confidence vote on Friday after his plan for a referendum on a bailout — supposed to save both Greece and the euro zone from disaster — backfired spectacularly.
But even if his socialist government survives the parliamentary vote, Papandreou's days as Greek leader looked numbered after a deal with his cabinet under which, government sources said, he agreed to stand down after negotiating a coalition with the conservative opposition.
Much of Greece and many European leaders reacted with horror after Papandreou abruptly announced on Monday that he would put the 130-billion-euro ($180-billion) rescue plan, agreed at a euro zone summit only last week, to the Greek people.
Papandreou came out fighting, rejecting opposition demands, in public at least, that he make way for a caretaker administration with just two tasks: forcing the bailout through parliament without a referendum and calling a snap election.
"The prime minister's position is very difficult, since he chose not to respond to the opposition's proposal for a transitional coalition government. Therefore, it is unlikely that he will win the vote," said head of ALCO pollsters, Costas Panagopoulos.
Through waves of austerity policies demanded by the nation's international lenders, Papandreou has carried the parliamentary group of his PASOK party with him, despite much grumbling within the ranks.
But a steady trickle of defections has reduced his majority to the point that one or two waverers could inflict a defeat in the confidence vote, expected as late as midnight.
PASOK has 152 deputies in the 300-member parliament. But lawmaker Eva Kaili said that while she would stay in the party, she would refuse to support the government in the confidence vote, meaning Papandreou could count at most on the support of 151 MPs.
Only one more defection would strip the government of its majority and probably trigger an early election.
Asian shares rose more than 2% and the euro steadied on hopes the referendum would be abandoned, but investors remained cautious over the confidence vote and the impact of any election.
TOOTH AND NAIL
Greeks have fought tooth and nail against policies which have brought spending cuts, tax rises and job losses, pushing the nation into three years of recession, and they have staged a series of strikes and protests, some of which turned violent.
This made a "no" vote in any referendum highly likely, even though this would cut off Greece's last international financial lifeline and risked spreading its debt crisis to much bigger euro zone economies, such as Italy and Spain.
But after a tumultuous day in Greek politics, the chances of the referendum being held dwindled to almost nothing on Thursday. Papandreou offered to drop the idea anyway if the conservative opposition New Democracy backed the bailout in parliament.
He also called on his PASOK party to rally behind him in the confidence vote. But his public bravado appeared to mask an acceptance that his term may come to an end soon.
Government sources said Papandreou had struck a deal at a cabinet meeting on Thursday under which he would stand down after he had negotiated a coalition agreement with the conservative opposition — provided he survives Friday's vote.
Ministers involved in striking the deal with Papandreou, led by Finance Minister Evangelos Venizelos, said he should go for the sake of their PASOK party.
"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 civilised, with no acrimony."
