It seems appropriate today that “chaos” is a Greek word. Greek politics is in turmoil, with its Prime Minister George Papandreou nixing his plans for a referendum on austerity measures in the latest eurozone bailout plan as he fights to hold his leadership.

Instead Papandreou started talks with the Greek opposition about forming a coalition government in order to get their approval for the eurozone plan, with the Greek opposition announcing its support today of the austerity measures. But the opposition is calling for Papandreou’s resignation.

There’s a severe breakdown in trust within Papandreou’s own party, with The Guardian reporting Papandreou ditched the referendum “amid scenes of open warfare in his own party”.

Kerin Hope and Tony Barber report from Athens for Financial Times:

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“On a day of roller-coaster politics, the Greek prime minister first made, then abruptly reversed, a decision to stand down from the premiership and help form a national unity government, leaving his PanHellenic Socialist Movement perplexed and angered by the unprecedented U-turn.”

A vote of confidence is due to be held on Friday, but even if Papandreou wins it he may step aside, reports Reuters:

“Greek Prime Minister George Papandreou has struck a deal with ministers to step down and hand power to a negotiated coalition government if they help him win a confidence vote on Friday, government sources with knowledge of a cabinet meeting said …

“… ‘He was told that he must leave calmy in order to save his party,’ one source told Reuters on condition of anonymity. ‘He agreed to step down. It was very civilized, with no acrimony.'”

The chaotic day came after a meeting in Cannes of G20 leaders on Wednesday night where Papandreou was chastised for his referendum plans by other European leaders.

Greek politicians have been openly talking about the possibility of leaving the eurozone. The ultimate euro taboo has been broken: never admit that you might leave the euro, says Stephen Fidler in The Wall Street Journal:

“The chances of Greece leaving the euro may have fallen on Thursday as the likelihood of a referendum receded. But the open airing of that possibility has broken the single most important rule governing the issue: If you’re going to do it, don’t advertise it beforehand.

Sending a message that exit is possible risks creating a crisis of confidence that eventually forces a government’s hand, with what economists say are potentially disastrous consequences.”

Leaving the eurozone doesn’t just mean changing a currency. The 2009 Lisbon treaty rules only accommodate for leaving the entire European Union, not just the eurozone.

It’s not just Greece’s economy future at stake, it’s Greece’s whole European identity, writes Tony Barber in the Financial Times:

“Aside from the existential question of the eurozone’s survival, what is at stake in the debt crisis is nothing less than the European identity of contemporary Greek society. This would be put to a severe test if Greece were to tumble out of the eurozone and suffer the mother of all economic and social implosions.”

The current model from the European Union — some countries making the money, other countries borrowing it and spending it — has failed. As Alexis Papachelas writes in Greece’s English newspaper Ekathimerini:

“Germany, Greece and Europe are all in unchartered waters because of the international crisis, as the EU is called on to find its place in the world in relation to the rise of powerful new countries, without losing the character of social states and the quality of life that made it so unique. Maybe at the end of the day the problem will be that the Germans have found the perfect model for productivity, and the Greeks have found the perfect model for living (albeit funded by others). In the next few years, whether we like it or not, we Greeks will come closer to the German model in order to survive. We hope that one way for us to increase our GDP and pay back our debts will be through greater professionalism and quality. This will bring Germans closer to our way of life when they visit us in the next summers, which will be crucial for us Greeks.”

On the plus side, global markets — and crude oil — rallied with the news that Greece will no longer hold its referendum.