Updated at 9:44 a.m. ET
ATHENS, Greece - Demands mounted Thursday for Greek Prime Minister George Papandreou to resign and let a coalition government approve a European bailout plan instead of holding a risky referendum on it.
Papandreou's proposal earlier this week to put the hard-fought bailout package to a referendum horrified Greece's international partners and creditors, triggering turmoil in financial markets as investors fretted over the prospect of a disorderly default and the country's exit from the 17-nation eurozone.
Papandreou's prospects, reports CBS News correspondent Allen Pizzey, are looking increasingly dim. He may well lose his position over his brazen decision to call a referendum.
The British Broadcasting Corp. reported that Papandreou was in fact offering his resignation in a meeting with Greece's president, but the report could not be immediately confirmed. According to the Reuters news agency, Papandreou was not stepping down, citing a source inside the prime minister's office.
Two officials in his office denied reports to The Associated Press that he would visit the country's president and tender his resignation in the afternoon. The president's office also said it had no knowledge of such a meeting.
What the Greek leader wanted, says Pizzey, was a national vote on whether the Greek people should accept the terms of a bailout from the European Union, but EU leaders made it clear Wednesday it would have to be about much more than that - whether Greece wanted to remain in the eurozone. And many of Papandreou's fellow lawmakers, even from his own party, say that is far too much to gamble.
Whatever they do, Pizzey says, they must do it soon, or Greece will simply run out of money, and the specter of renewed riots is very real if government doesn't find a way out of the crisis.
The instability in Greece sent immediate ripples throughout Europe. Premier Silvio Berlusconi's government in Italy was teetering as well after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout.
European Central Bank made a surprise decision Thursday to cut interest rates by a quarter of a percentage point to 1.25 percent, responding to the financial turmoil.
The drama also dominated the G-20 meeting in the French resort of Cannes, where the leaders of the world's economic powerhouses had gathered to solve Europe's debt crisis, which threatens to push the world back into recession.
Papandreou was holding an emergency meeting Thursday with his ministers. Several of them called for a coalition national unity government that would approve the bailout package without a referendum and make sure the country receives vital funds to prevent imminent bankruptcy.
Several of Papandreou's close associates said they did not know what his intentions were, but he was delivering a speech to his ministers.
"He wrote the speech himself. Nobody knows what's in it," said one close associate who spoke on condition of anonymity to discuss the prime minister's actions.
Antonis Samaras, the leader of the main opposition party, called for a transitional government to ratify the European debt deal and prepare for early elections.
"Under the weight of these dramatic events, we have witnessed a crisis of the ability to govern. The country must immediately return to a state of normality," Samaras said. "Under the current conditions, the new debt deal is unavoidable and must be safeguarded."
State TV said lawmakers were sounding out former European Central Bank vice president Lucas Papademos as a possible unity government leader.
If the Greek government did fall, it would mean that every EU nation that had already received a bailout Greece, Portugal and Ireland saw their governments fall during the economic turmoil.
Earlier Thursday, Papandreou's own finance minister, Evangelos Venizelos, broke ranks with him and declared his opposition to a referendum.
"Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt," Venizelos said, adding that it "cannot depend on a referendum."
Venizelos said the country's attention should be focused on quickly getting a crucial euro8 billion ($11 billion) installment of bailout funds, without which it faces bankruptcy with weeks.
"What matters now, is that we must save what we can, to remain united," Health Minister Andreas Loverdos said as he arrived for the cabinet meeting. "We must keep the country at a position it reached after half a century of sacrifice in the European Union and the eurozone."
Development Minister Michalis Chrisohoidis called for unity and said the priority was for parliament to ratify the new debt deal. "There can be no ... return to the drachma and the past," Chrisohoidis said.
The strong Greek rejection of Papandreou's referendum proposal helped calm frayed nerves in the markets. Athens' main stock market outperformed its peers, rising 4 percent in midday trading following three days of big falls.