Greek Prime Minister George Papandreou called an emergency cabinet meeting Thursday after more defections by his socialist party's lawmakers over his surprise plan for a euro referendum erased his majority in Parliament.
Also coming out against the plan was Finance Minister Evangelos Venizelos, who like other cabinet colleagues, wasn't informed of Mr. Papandreou's plan before the surprise announcement on Monday. Mr. Venizelos said in a statement he is against a referendum that essentially will decide whether Greece remains in the euro zone.
"Greece's place in the euro is a historical conquest by the Greek people that cannot be placed in question...this cannot be made dependent on a referendum," he said after returning from a meeting of leaders from the Group of 20 industrial and emerging economies in Cannes, France.
The likelihood of snap elections grew after the defections delivered a possibly mortal blow to Mr. Papandreou's government, which has faced a revolt from within his ruling Pasok party over the referendum plans. New elections would pull back Greece from a euro referendum, but would bring a period of political uncertainty and possibly demands by a new government to rework Greece's bailout deal.
Dwindling support casts more doubt on whether Mr. Papandreou can survive a vote of confidence in Parliament Friday, when the controversial referendum proposal will be the central concern.
Earlier Thursday, one Socialist lawmaker announced her resignation from the party, while a second declared she would vote against the confidence motion.
That means that Mr. Papandreou's already slender governing majority has now been slashed to 150 seats in Greece's 300-member parliament—effectively making it impossible for him to govern.
Several other socialist lawmakers called for the creation of a unity government that will secure approval of Greece's latest loan agreement and lead the country to new elections.
"It is critical that the country's political forces agree to the creation of a national salvation government," Socialist party lawmaker Dimitris Lintzeris told reporters in parliament. "Papandreou is past."
Greek opposition New Democracy leader Antonis Samaras is considering entering into a possible coalition government if Prime Minister George Papandreou is forced to resign after a revolt inside his Pasok socialist party against his euro reform plans, according to two senior opposition officials.
The officials said that Mr. Samaras was prepared to reconsider his reluctance to participate in a government of national unity if Mr. Papandreou stepped down as prime minister and a snap election date was set immediately.
"We are prepared to discuss an interim solution if he [Papandreou] goes," one of the people said.
A senior Pasok deputy said he believed a Mr. Papandreou resignation and the formation of a national unity government was the most prominent scenario.
A New Democracy deputy, Sotiris Hatzigakis, sent a letter to Mr. Samaras asking him to lead procedures to form a government of national unity that would include as many parties as possible. "[Samaras] ought to take initiative for a national unity government with the participation of parties of the wider democratic spectrum," the letter said.
Officially, the New Democracy was non-committal. "We are observing developments closely and considering our response," Mr. Samaras's spokesman said.
In Cannes, Mr. Papandreou was grilled by other euro-zone leaders Wednesday night when it was made plain that Greece was running out of time and needed to make a clear decision that it would make the sacrifices needed to continue to receive financial support and remain in the euro zone.
Several European leaders have stated their deep frustration that this latest development risks delaying broader efforts to defend the euro by months, including an enhanced bailout found for insolvent governments.
French President Nicolas Sarkozy warned in Cannes that Greece won't receive any further aid until the issue is resolved, echoing the views of German Chancellor Angela Merkel, who was also present.
"Does Greece want to remain part of the euro zone or not," Ms. Merkel said. "That is the question the Greek people must now answer."
Greece's partners insisted that if Greece goes through with a referendum on the euro, that it at least be held no later than early December. Many fear that prolonged uncertainty increases the risk of a Greek bankruptcy that could unsettle holders of debt in other weaker euro-zone governments, such as Italy or Spain.
Mr. Sarkozy and Christine Lagarde, head of the International Monetary Fund, both said Wednesday night that Greece wouldn't receive the next €8 billion ($11.0 billion) aid payment until clarity is restored to Greece's future. Amounting to a three-month delay in a payment that was originally due in September, the postponement adds new pressure on Greece's public finances.
Potential investors in Europe's new bailout fund, notably China, now say no decisions will be made until the fund's details are known and Greece's future is clear.
Also on ice is a tentative agreement for Greece's creditor banks to accept a 50% loss on their Greek government bond holdings, the core of a debt-relief program for Athens.
"The unexpected springing of the referendum on EU partners immediately after two EU summits in a week had reached what looked like a breakthrough deal has shredded that irretrievably," BNP Paribas economists said in a a note to clients.
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