ATHENS — The government of Prime Minister George Papandreou teetered on the verge of collapse on Tuesday, threatening Greece’s adherence to the terms of a new deal with its foreign lenders and plunging Europe into a fresh bout of financial turmoil.
Several lawmakers in the governing Socialist Party rejected Mr. Papandreou’s surprise plan for a popular referendum on the Greek bailout, raising the possibility that he will not survive a no-confidence vote scheduled for Friday that depends on his holding together a razor-thin parliamentary majority.
An emergency cabinet meeting convened by Mr. Papandreou ended at nearly 3 a.m. Wednesday, with the cabinet saying that it unanimously supported the prime minister’s call for a referendum, local news outlets reported. The opposition and some members of his own party, however, were calling for new elections immediately.
The impasse in Athens seemed likely to delay — and perhaps scuttle — the debt deal that European leaders reached after marathon negotiations in Brussels last week. Financial markets cratered on Tuesday for the second straight day, wiping out the gains since the Brussels deal was announced last week. Some analysts said that Greece was now coming closer to a messy default on its debt, and perhaps a departure from the zone of 17 countries that use the euro as their common currency.
Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, apparently caught off guard by Mr. Papandreou’s call for a referendum and then by the disarray in his party, said they would hold emergency talks on Greece with euro zone leaders on Wednesday. They said they also planned to meet with representatives of the Greek government before a critical meeting of the Group of 20 advanced and emerging economies on Thursday, and they defended the terms of the bailout package as “more necessary than ever today.”
The chairman of the euro zone finance ministers, Jean-Claude Juncker, warned that the plan to hold a referendum endangered an $11 billion loan that Greece was to receive under the bailout deal, and that Greece urgently needed to avoid a default. Mr. Juncker, who is also the prime minister of Luxembourg, added that Greece could face bankruptcy if it votes “no” on the bailout.
The big fear is that a decisive turn against the bailout package in Greece could undermine European efforts to enforce deep budget cuts in other heavily indebted European countries, especially Italy, which is mired in its own political crisis and has a far larger economy and much more debt than Greece.
Political analysts and several advisers to Mr. Papandreou said the prime minister had decided to announce a popular referendum on Monday night as his last best hope to shore up his eroded political standing. They said he wanted to put Greece’s fate back in the hands of the Greek people and to force his many opponents — both inside his government and in the opposition — to coalesce around the idea that what is at stake is Greece’s membership in the euro.
He wanted Greek voters “to take a position, to see the choice before us in its starkness, hoping they will back the lesser of two evils, instead of letting irate reactions in the streets dominate the debate,” said one adviser to the prime minister.
But on Tuesday, it appeared that his move may have backfired. A lawmaker in his governing coalition left the Socialist Party to become an independent, another said she would not vote confidence in the government unless the prime minister formed a coalition government, and an additional six leading Socialists wrote a letter calling on Mr. Papandreou to resign and schedule early elections for a new government with greater political legitimacy. Together, the developments made it doubtful whether his government would survive a confidence vote, because the loss of even two supporters threatened his parliamentary majority.
“Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma,” Mr. Samaras said on Tuesday. “New Democracy is determined to avert, at all costs, such reckless adventurism.”
Mr. Samaras declined to say whether he would ask his 85 members of Parliament to resign, a move that would lead to the dissolution of Parliament and a snap election. The next general election was not due until 2013, when the Socialists’ four-year term expires. Mr. Samaras is expected to clarify his stance at a meeting of his party’s parliamentary group on Wednesday.
While the political instability took Europe and markets by surprise, it was less of a shock in Greece. Mr. Papandreou’s political capital had run out and tension has been building for months — not only with the center-right opposition, which objected to many of the terms of the austerity plan, but also within his own party.
That party, known as Pasok, is deeply divided. A more reform-minded wing is upset that Mr. Papandreou has not acted decisively enough to carry out the structural changes needed to revive the economy, while a more traditional wing is opposed to some of the changes that inevitably cut into the heart of the social welfare state the party was elected to promote.
On Tuesday, the two sides appeared to gravitate toward one idea: That the referendum proposed by Mr. Papandreou was a mistake.
“His party just couldn’t hold any more,” said Ilias Nicolacopoulos, a professor of political science at the University of Athens and a pollster with close ties to the Socialist Party.
“He did exactly the opposite of what a large number of his M.P.’s were asking for,” he said. “They were asking for a coalition government or cabinet reshuffle or some sort of cooperation that would bring broader consensus, not a referendum that would put the country in danger of blowing everything up.”
Eva Kaili, a Socialist member of Parliament, said she would not support the government in a confidence vote and called for a government of national unity. She said it was too late for a referendum, because it might destroy the arrangement already reached with Greece’s foreign lenders.
“It took us a long time to manage to reach an agreement,” Ms. Kaili said in a telephone interview. “The time is over. This should have happened one year ago, to ask people if they want the I.M.F. to help us or not.”
If Mr. Papandreou’s government falls, it would not be the first one in Europe to be toppled by the austerity demanded by European debt relief. In Ireland and Portugal, governments fell after accepting bailouts from the European Union and the I.M.F., and last month the Slovakian government fell over a vote on whether to participate in the European Union’s rescue package.
But Greece’s problems are more acute, and its economic slump is much deeper, making the prospect of a government collapse even more worrying. While a new government might try to reopen negotiations with lenders and seek new terms, European leaders have repeatedly dismissed that idea, saying that trying to do so would be damaging and would throw away months of work on a plan to keep Greece from defaulting.
Many Greek voters say they are tired of hearing about decisions taken in foreign capitals and political initiatives that do not represent ordinary Greeks. “The government is no longer in control — others are calling the shots,” said Akis Tsirogiannis, a 42-year-old father who recently lost his job at a furniture workshop in Athens.
He said he would vote against the debt deal in a referendum. “This deal, like all the others, is a life sentence of austerity for Greeks,” he said. “We need to reclaim our country.”