The government of Greek Prime Minister George Papandreou is teetering on the verge of collapse after a day of tumult triggered by his decision to hold a referendum on the country’s EU bailout package.
Lawmakers called for snap elections while a member of the ruling Socialist party defected, reducing their parliamentary majority to just two seats.
Another socialist deputy threatened to defect if the government went ahead with the referendum plan, while six Socialist party members issued a statement calling for Papandreou to go.
Meanwhile, world financial markets also plummeted amid fears that the eurozone is in jeopardy.
Papandreou shocked both the Greek public and European leaders on October 31 in calling for a public vote early next year on the terms of a second, massive EU bailout package that is meant to save the country from defaulting.
"This is the highest form of democracy," Papandreou said. "It is a great moment of patriotism for the citizens to decide, so let us then give the final word to the people and let the citizens decide -- to decide not for people and parties, but for the fate and course of the country."
The bailout deal would give Athens a 100 billion-euro rescue and a 50 percent write-down on its crippling debt.
But under pressure from massive street protests against the austerity measures imposed as a condition for receiving bailout money, the prime minister said he needed wider support before accepting the package.
A confidence vote in the government is also scheduled for November 4.
If the government failed to survive the vote, the planned referendum would be scrapped, although implementing the conditions to receive the bailout money could still be delayed.
If the referendum proceeded -- and the Greek public voted against the bailout -- the implications could be severe for the world economy.
Analysts say Greece’s participation in the eurozone would be jeopardized, a messy debt default could result, and global banks and markets would be hard-hit.
Antonis Samaras, the leader of Greece’s New Democracy opposition party, told journalists on November 1 that he was determined to keep his country in the economic bloc.
"In order to save himself, Mr. Papandreou has posed a dilemma of blackmail that puts our future and our position in Europe in danger," he said. "I explained to the president that New Democracy is determined, at all costs, to prevent such opportunistic experiments. We do not have in front of us just a request for elections; at this moment elections are a national necessity."
The Fitch ratings agency said rejecting the bailout deal would have profound effects of the viability of the eurozone as a whole.
As European leaders scrambled, French President Nicholas Sarkozy urged Greece to accept the deal.
"Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts," he said.
Greek Finance Minister Evangelos Venizelos made a flurry of phone calls to anxious European and International Monetary Fund (IMF) officials to brief them on developments.
In a call to German Chancellor Angela Merkel, Papandreou insisted that the referendum would "strengthen" Greece in the eurozone.
He was to hold a crisis meeting of government ministers later in the day.
The prime minister will travel to Cannes, France on November 2 where G20 leaders are holding a summit later in the week.
Papandreou is to attend a working dinner with Sarkozy, Merkel, other top European officials, and head policymakers from the eurozone, the European Central Bank, and the IMF.
The news from Greece sent world markets into a tailspin of selling, as Britain’s FTSE 100 index fell 2.7 percent, France's main stock index fell 5.4 percent, and Germany's fell 5 percent.
The value of the euro slumped against the dollar, although U.S. markets also tumbled.
The Dow Jones industrial average was down 2.5 percent, while the Standard & Poor's 500 index slid 2.9 percent.
The markets’ downturn came only days after soaring on the news that the hard-fought new bailout package for Greece had been agreed.
Meanwhile, on the streets of Athens, many appeared exasperated at their country’s situation.
"The referendum represents the failure of the government and this is an effort to blame this failure on the Greek people," said pensioner Angelos Paraskevopoulos, who spoke to Reuters.
"If this referendum takes place, there will be no good outcome. If we vote for the IMF we are condemned. If we return to the drachma, we are again condemned."
compiled from agency reports