Greece's embattled prime minister and the head of the main opposition party reached an initial agreement on Sunday night to form an interim government that will ensure the country's new European debt deal and then lead Greece to early elections, the president's office said.

The announcement came after President Karolos Papoulias chaired crisis talks between Prime Minister George Papandreou and opposition leader Antonis Samaras, capping a week of drama sparked by Papandreou's announcement he was taking the debt deal to a referendum.

He withdrew the plan on Thursday after intense opposition from European leaders and his own lawmakers.

Christos Papoutsis, the Civil Protection Minister, had described the political impasse after the confidence vote as "an absurd pantomime which can only harm the country."

The political turmoil had also frayed nerves on international markets and seen Greece's cherished membership of Europe's joint currency come under threat.

Greece is anxious to reach an agreement quickly on a new government, as it faces a meeting of eurozone finance ministers in Brussels on Monday.

Papandreou has already made clear he will not head the interim government, the president's announcement said, adding that there would be a meeting between the premier and Samaras on Monday to discuss who will act as interim prime minister and the makeup of the Cabinet.

Papoulias also would chair a meeting of the heads of all political parties.

Faced with an open rebellion from his own Socialist lawmakers and mounting pressure to resign, Papandreou had said he would step aside if agreement could be reached on an interim government that would secure the new European debt deal and the disbursement of a vital bailout loan instalment without which the country will default within weeks.

He survived a confidence vote in his government on Saturday.

For his part, Samaras had insisted he would only sit at the negotiating table if Papandreou resigned first, leading to a stalemate broken by Papoulias' calling both sides to the meeting.

Meanwhile, a spokesman for the Greek government said a coalition government in Greece will be formed "very soon, early next week".

Speaking in Athens after the Prime Minister Papandreou and opposition leader Antonia Samaras had met in President's office, government spokesman Elias Mosialos also said there will be "no elections in the near future in Greece".

He added the Greeks will only be called to the polls after the full implementation of the October 26th agreement - the rescue deal negotiated with the Eurozone leaders.

Mosialos described Sunday's talks between Papandreou and opposition leader Antonis Samaras as a "comprehensive and constructive discussion."