Greek PM to step down for euro deal

Intense European pressure has forced debt-stricken Greece to seek political consensus on a new bailout plan instead of holding a referendum after EU leaders raised the prospect of a Greek exit from the euro to preserve the single currency.

Fast-moving events in Athens overshadowed the first day of a summit of the Group of 20 major economies on the French Riviera on Thursday, with anxious world leaders urging Europe to act to stop contagion from its sovereign debt crisis.

Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters.

"He was told that he must leave calmly in order to save his (PASOK) party," one source said on condition of anonymity. "He agreed to step down. It was very civilised, with no acrimony."

Papandreou, son and grandson of left-wing prime ministers, hinted he was ready to quit for the sake of national unity, telling parliament he was not wedded to his job.

G20 leaders meeting in Cannes discussed increasing the International Monetary Fund's resources and building a financial firewall to protect vulnerable euro zone economies Italy and Spain from a possible Greek default.

Papandreou said his call this week for a referendum, which sparked panic on global financial markets and infuriated European partners, "was never a purpose in itself," and he would be happy if the vote were not held.

Papandreou told PASOK lawmakers he had agreed to talks with the centre-right opposition on a transitional government to implement a new EU/IMF bailout programme agreed last week, and pave the way for early elections.

At a bruising meeting in Cannes on Wednesday night, French President Nicolas Sarkozy and German Chancellor Angela Merkel warned him that Athens would not receive a cent more in aid until it met its commitments to the euro zone.

Greece was due to get a vital 8 billion euro installment this month and says it will run out of money in mid-December if it does not get the loan.