Greece will hold elections on June 17, and a court official will be appointed to head the interim government until then, Greek state television reported Wednesday.
Council of State head Panagiotis Pikramenos is to be named interim prime minister.
Communist Party leader Aleka Papariga said party leaders agreed that the interim government won't be able to make any internationally binding decisions. She spoke after a meeting of leaders convened by President Karolos Papoulias.
'And that will be a new Europe — and maybe not such a comfortable one.' —Hans Stark, analyst
Uncertainty over the country's future — and therefore the economic future of the European Union — is expected to continue at least until the election results are known.
A nine-day deadlock in coalition negotiations after inconclusive elections forced Greece to hold the new elections.
The outright collapse of the European Union is being openly discussed as Greece sets up its caretaker government.
If left-wing parties take control after the June 17 election, it's likely the country will turn its back on austerity and the bailout it negotiated with the EU, analysts say.
That would almost certainly force Greece out of using the common European currency, the euro, which could unleash even more economic turmoil.
"The euro could disappear, and if the euro disappears, there is the danger that the whole European Union as such will disappear as well," Hans Stark, a political analyst with French Institute of International Relations (IFRI), said Tuesday in Paris.
"And that will be a new Europe — and maybe not such a comfortable one."
Concern over financial crisis
The head of the International Monetary Fund, Christine Lagarde, says Europe must be prepared for Greece to exit the eurozone, and warns that such a scenario would be quite messy.
European Central Bank head Mario Draghi said Wednesday that the "strong preference" of the ECB's leadership is for financially troubled Greece to stay in the euro.
Draghi said that there's no provision in the European Union's basic treaty for a country to leave the 17-member shared currency, and that it's not up to the ECB and its 23-member governing council to decide the matter.
"I want to state that the governing council's strong preference is that Greece will continue to say in the euro area," he said in a speech Wednesday at a conference in Frankfurt.
Some European officials have raised the possibility that Greece's inability to make payments on its debts and comply with the terms of its bailout loans could result in a euro exit. Economists say leaving the euro would lead to even deeper economic and financial turmoil in Greece, which is suffering its fifth straight year of recession.
Two members of the bank's governing council — Irish central bank head Patrick Honohan and Belgian central bank head Luc Coene — have reportedly mentioned the possibility of a Greek euro exit in public recently. Draghi's remark appeared to be aimed at least in part at dialing back those comments.
Coene was quoted by the Financial Times as saying it was best if no country left the euro but added it was up to the Greeks and mentioned the possibility of an "amicable divorce." Honohan reportedly said in a speech that a Greek euro exit was not attractive but would not be "fatal."
The heads of the 17 euro area national central banks sit on the ECB's rate-setting governing council along with six members of the bank's executive committee, including Draghi.