Greek crisis: Prime minister George Papandreou resigns for new coalition government

Greek prime minister George Papandreou will step down as leaders agree to form a new coalition government, the president's office said on Sunday night.

The temporary government will be set up to decide how to enact a controversial bailout agreement that will help Greece through possibly its worst economic crisis to date.

The deal was reached following crisis talks between Mr Papandreou, the country's main opposition leader Antonis Samaras and President Carolos Papoulias.

It comes after a day of speculation that the PM would step down to placate the New Democracy party's Mr Samaras, who refused to negotiate a way out unless Mr Papandreou resigned first.

A statement from the president's office said the leaders will meet again on Monday to decide who will head the coalition, though there has been no mention of how long the interim administration will last.

Greece is under immense international pressure from eurozone leaders to implement a fresh €130billion (£111billion) bailout package agreed in Brussels on 27 October.

More desperately needed funds will not be released until it has been ratified in parliament.

The near-bankrupt country faced the threat of being ousted from the EU after the PM announced he would put the bailout deal - which includes highly unpopular austerity measures - to Greek citizens in a referendum.

The proposition was dropped soon after but still sent markets into turmoil and sparked a political crisis that saw Mr Papandreou narrowly win a confidence vote early Saturday morning.

There's speculation that Finance Minister Evangelos Venizelos may be chosen to lead the new coalition.