Talks to agree on a new prime minister collapsed this evening despite what seemed like a deal earlier in the day to pick parliament speaker Filippos Petsalnikos for the post
The office of the Greek president now says the talks will resume tomorrow.
Earlier, Greek prime minister George Papandreou said he was stepping downwithout saying who would succeed him as the country heads towards an economic precipice.
Giorgos Karatzaferis, the head of a small right-wing party, stormed out of the talks accusing the heads of the two main parties of using "trickery" but not giving any details.
The breakdown in talks came less than hour after Mr Papandreou said the country's two main parties had reached an agreement to form an interim coalition government to secure a new €130 billion debt deal and keep the country in the single currency.
Negotiations have been going on for days between Mr Papandreou's Pasok party and the conservative opposition New Democracy group. The smaller rightist Popular Orthodox Rally (Laos) party is also hoping to secure some cabinet seats.
In a television address before heading to meet president Karolos Papouliato formally resign this evening, Mr Papandreou wished the new prime minister well without giving any name and declared that Greece had avoided bankruptcy.
He also said the new government would win approval for Greece's €130 billion bailout deal and secure the nation's membership of the euro zone despite its crisis. "I am proud that, despite the difficulties, we avoided bankruptcy and ensured the country stayed on its feet," he said. "I want to wish the new prime minister success, I will support the new effort with all my strength.
"Today, despite our differences - political and social differences do exist - we have put aside our fruitless conflict and disagreement," Mr Papandreou said.
There has been growing impatience from the European Union and fears among ordinary Greeks that the deadlock could push their country towards an exit from the euro zone.
In the latest sign of concern among EU leaders over the impasse in Athens, Mr Papandreou's office said the premier had briefed French president Nicolas Sarkozy by phone today on the negotiations for a new government.
Mr Sarkozy gave his Greek counterpart a frosty reception at a summit in Cannes last week, and has openly said it is up to Greece to show it deserves to stay in the euro zone.
In the past two days, government sources have made a number of optimistic predictions about forming the government, which must secure a €130 billion bailout before Greece runs out of cash, only for no deal to materialise.
Some Greek media reported Mr Papademos had set conditions that the parties would not accept, and others that there were objections from finance minister Evangelos Venizelos, because Mr Papademos wanted to change the government's economic team.
Adding to the confusion, conservative leader Antonis Samaras became embroiled in a dispute within his New Democracy party and a related row with the European Union. Party political sources said some New Democracy lawmakers were accusing Mr Samaras of giving away too much, especially when he agreed to accept austerity measures in the bailout package.
Mr Samaras had long argued that the spending cuts, tax rises and job losses imposed by the outgoing socialist government under orders from the EU and IMF had deepened Greece's crippling recession, now in its fourth year.
Greece must have a new coalition to secure the bailout, negotiate the release of emergency funds from the EU and IMF to avoid bankruptcy when big debt repayments come due next month, and safeguard its place in the euro zone.
On the other hand, the European Union needs to put out the fire in Greece to prove to international financial markets that it can tackle another blaze in Italy, a far bigger economy also heading for economic and political crisis.
Agencies
