The high-stakes poker game at the top of the Greek parliament will continue Friday as the country braces itself for the outcome of a key confidence vote later in the day.
Greek Finance Minister Evangelos Venizelos confrmed Friday that the government has dropped its plans to hold a controversial referendum. When Prime Minister George Papandreou called the referendum on Monday, it plunged his government into chaos.
Venizelos has told Eurogroup Chairman Jean-Claude Juncker, European Commission's Economy and Monetary Affairs chief Olli Rehn and German Finance Minister Wolfgang Schaeuble, that the referendum will now definitely not take place, the Greek finance ministry said in a statement.
Opposition party New Democracy favors the installation of an interim coalition government, the resignation of Papandreou and a snap election as soon as possible, a source in the party told CNBC. The party is eager to ensure that Greece gets its next tranche of aid.
Papandreou wants his party the Panhellenic Socialist Movement (Pasok) to support him in today's confidence vote, and has told them that this will give him, and the party, more negotiating power with the opposition, a separate source in the Greek government told CNBC.
On Thursday, a flurry of will-he-won't-he headlines from Athens had Papandreou in and out of office like a jack-in-the-box.
The (Pasok) leader could step down if he gets the backing of his colleagues in Friday's confidence vote, a source in the Greek government told CNBC Friday.
Meanwhile, there have been a new wave of withdrawals from Greek banks in recent days, according to a report by Greek news website ekathimerini Thursday night. The banking system could be endangered if more liquidity is removed.
European Commission President Jose Manuel Barroso told the BBC Friday that it was "up to" the Greeks if they wanted to remain in the euro.
He added that he expects Greece to form a coalition government and to approve its bailout package.
"What is the other option for the Greek people? To have a default and to have real difficulty paying wages to the public servants, to the schools, to the hospitals, it will mean the paralysis of the country," he said. "I'm sure the majority of the Greek people are reasonable people and that they don't want that kind of chaos to come to their country."
"So many things are still up in the air," Simon Derrick, Chief Currency Strategist, BNY Mellon, told CNBC Friday.
"We are probably going to lose Papandreou, get some sort of transitional government and have an election."
"The market is still clearly extremely worried," Patrick Legland Global Head of Research, Societe Generale, told CNBC.
"Confidence has completely vanished in just a week, and it has proved that European leaders will find it extremely difficult to find a solution."
European markets opened up slightly Friday after the leader of opposition party New Democracy Antonis Samaras said that he would support the bailout package, which would mean a 50 percent haircut to the country's debt. However, it would also involve a permanent task force of European Union spending controllers in all Greek ministries to ensure compliance, which some Greeks believe is a step too far towards surrendering sovereignty.
"The key element yesterday was that the opposition leader accepted the bailout," said Derrick.
"That at least means that Greece should get the next tranche of aid, and that means that the bond payment due on December 19th is going to be paid. From that perspective, we seem to have got over the worst of it."
"As things deteriorate, European politicians will be put in a position where they simply have to address the flaws in the system," John Wraith, fixed income strategist at BofA Merrill Lynch Global Research, told CNBC Friday.
Papandreou has abandoned plans for a referendum on the most recent bailout deal for debt-laden Greece. The announcement of the referendum on Monday precipitated the most recent crisis in his government.
Papandreou has had to justify his actions to other euro zone leaders and the so-called troika of the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission, which is funding the bailout. The troika threatened to hold off paying the next tranche until there was more certainty over the referendum.
Sarkozy told reporters at the G20 summit in Cannes Thursday evening: "I don’t want to give any idea that we’re trying to get involved in Greek domestic politics but if we’re talking about defending the euro zone, the euro and Europe, then that’s our obligation, our duty."
Papandreou said in the Greek parliament on Thursday: "Let's move on to a Greece that doesn't need other powers to support it, a Greece that can support itself."
He is the third of his line to serve as prime minister of Greece, after father Andreas –who founded PASOK - and grandfather George. In Greece, his grandfather is known as Georgios (or George) while the current Prime Minister goes by the diminutive "Giorgakis" – little George or Georgy. The 59 year-old has had more than three decades in Greek politics.
"Trying to make a judgement about where we are going to be even in a few days time is very difficult," said Derrick.