THE unfurling Greek tragedy claimed its biggest scalp yet last night as Prime Minister George Papandreou finally agreed to stand down.
A new government of national unity will now be formed, with Papandreou yielding control when the deal is finalised.
The decision followed crisis talks last night with conservative opposition leader Antonis Samaras and President Karolos Papoulias.
The new government faces the unenviable task of approving the country’s €130bn (£112bn) bailout package, with the eyes of the world upon it and the future of the Eurozone hanging in the balance.
Papandreou and his opponents were desperate to hammer out a deal ahead of a meeting by Eurozone finance ministers today, in a bid to show that Greece is serious about taking the steps needed to stave off bankruptcy.
The latest €8bn tranche of its bailout package was due this month but the EU and IMF said it would not receive it until they were convinced Greece could stick to its austerity programme.
The Greek government was in turmoil last week after Papandreou proposed a referendum on the bailout, only for it to be withdrawn hours later. He survived a vote of no confidence on Saturday before the talks that led to his resignation.
Former vice-president of the European Central Bank Loukas Papademos, former minister Petros Molyviatos and finance minister Evangelos Venizelos are seen as front runners for the leadership.
After the bailout deal is decided an election will be held, although no time-frame has been given on how long the interim government could last. An increasing groundswell in Greece, led by sections of the media, is calling on the coalition to abandon the euro altogether and return to the drachma. Even France and Germany, the Eurozone’s biggest cheerleaders, have acknowledged that a Greek exit from the single currency is no longer inconceivable.
Meanwhile IMF head Christine Lagarde arrived in Russia last night in a bid to persuade Moscow to chip in to the Eurozone bailout fund.
Moscow has said it is willing to talk bilaterally with affected countries but has been very careful in pledging cash to the Eurozone as a whole. Russia has so far pledged $10bn (£6.24bn) to be used by the IMF – a fraction of the €1 trillion that Europe’s leaders have earmarked for the European Financial Stability Facility (EFSF).
Lagarde will then fly on to China and Japan for further talks on the crisis.