Papandreou says farewell – but no new PM is in sight

Fears grow for Greek debt repayments as Athens is gripped by political paralysis

Greece is closer than ever to a chaotic default as its search for a new prime minister enters its fourth day with bickering politicians unable to form a power-sharing government.

A roll call of progressively less-impressive candidates have been connected with the premiership as Greece has attempted to stay in the eurozone despite its apparent political paralysis. Talks over a new line-up ended in disarray last night despite assurances from both the main parties that a new government would be sworn in.

Outgoing Prime Minister George Papandreou made a farewell address on national television in which he failed to name a successor but congratulated himself on a "historic agreement" with the opposition, disregarding the deadlock.

"It was obvious that in order to achieve this historic agreement, we would have to find a person who had everyone's support," he said.

But as he spoke, Athens was consumed by a furious blame game as the main opposition leader Antonis Samaras said it was up to the ruling socialists to take the initiative and name its preferred candidate.

Greece's European allies have demanded a national unity government that can deliver a consensus on the bailout package offered at last month's EU summit. The Eurogroup has made it clear to Athens that written assurances of a cross-party commitment to the full terms of the international rescue will be required before the final tranche of the original bailout will be released. Greece needs the €8bn (£6.8bn) to avoid going bankrupt at the beginning of December.

The need to reassure the rest of Europe meant the former European Central Bank governor Lucas Papademos was the early front runner for the premier's role but he appeared to have ruled himself out after feuding party leaders refused his reported requests for a longer transitional period and the right to appoint ministers.

The interim government agreed in principle by party leaders would govern for 100 days to pass the laws stipulated by the bailout before making way after elections in February.

Midway through yesterday, both main parties had agreed to settle on veteran socialist MP Filippos Petsalnikos, only for smaller parties who have joined the talks to rule out his candidacy. Greek political commentator Alexis Papahelas described the attempt to install Pasok party stalwart Mr Petsalnikos in the prime minister's office as a "suicide attempt" that would have ruined Greece's remaining credibility.

The impasse between Pasok and conservative rivals New Democracy has given new credibility to fringe parties such as the far-right nationalists LAOS, who have appeared more urgent in the search for a solution to the country's mounting crisis.