The government of Greek Prime Minister George Papandreou faces a crucial confidence vote on Friday night, a day after the country saw intense political horse trading and power struggles.

Papandreou said Thursday that a controversial proposal to hold a referendum on an international bailout for his country would not be necessary if the opposition were to support the tough austerity measures that accompany it.

The centre-right opposition however demanded Prime Minister George Papandreou resign, throwing into disarray plans for a unity government.

Opposition leader Antonis Samaras also called for snap elections before leading his MPs in a dramatic walkout of parliament.

Papandreou's party holds a tiny majority in parliament - 152 out of 300 seats.

At least three members of Papandreou's Pasok party have said this week they no longer back him, but he has the support of one independent, giving him a one-vote majority in Parliament.

A day of turmoil on Thursday, the prime minister told MPs that talks with the opposition on forming a "broader scheme" - apparently meaning a coalition government - should start immediately.

However, an angry Samaras questioned the motives behind Mr Papandreou's actions.

"I am wondering; Mr Papandreou almost destroyed Greece and Europe, the euro, the international stock markets, his own party in order to ensure what? So that he could blackmail me and the Greek public? Or to ensure what I had already said several days ago; that I accept the bailout agreement as unavoidable?"

Papandreou told MPs the referendum was never an end in itself, and there were two other choices - an election, which he said would bankrupt the country, or a consensus in parliament.

Papandreou's own party is also split. Four ministers, including Finance Minister Evangelos Venizelos, have strongly opposed the referendum on Thursday

Addressing Pasok MPs immediately after the prime minister, Venizelos said Greece must say it was not holding a referendum.