Athens, Greece (CNN) -- Prime Minister George Papandreou faces a crunch confidence vote Friday, after days of political turmoil sparked by his controversial proposal to hold a referendum on an international bailout for his country.
His socialist PASOK party has a tiny majority in parliament and it is unclear whether he will survive the vote, or what might follow if he does.
The political instability in Greece has caused political and financial jitters throughout Europe and beyond, as world leaders meet in Cannes, France, for the G-20 economic summit.
U.S. President Barack Obama told the summit Friday he was confident that Europe had the capacity to meet the challenge presented by the troubled global economy.
"Make no mistake, there is more hard work ahead and more difficult changes to make but our European partners have laid a foundation on which to build," Obama said.
Recent events in Greece have underscored the importance of implementing a Greek economic bailout plan fully and quickly, he said, but the elements were in place to ensure stability -- including a firewall around European debt, the strengthening of European banks, charting a sustainable path for Greece and making structural reforms.
"All of us have an enormous interest in Europe's success and all of us will be affected if Europe is not growing," he said.
In an interview with France 2-TF1, Obama said, "One of the most important things I can do for the European economy is to make sure the American economy is growing."
In the same interview, French President Nicolas Sarkozy said it was time for action on the Greek bailout. "We cannot simply stand by and watch as people -- tens of thousands of people who have nothing to do with this, whose fault it is not -- lose their jobs and simply flap our hands."
Papandreou's surprise call this week for a referendum on the bailout deal was ill-advised, Sarkozy said. "The real issue was: Do you want to remain in the euro or not?" Sarkozy said. "We cannot ask French taxpayers to continue lending money to Greece while the Greeks say, 'These rules don't belong to us.'"
Greek Finance Minister Evangelos Venizelos has told the European Commission that there will be no referendum on the bailout deal agreed to last week in Brussels, his office said Friday.
The move followed heavy international pressure on Papandreou to drop the planned referendum, announced at the start of the week to the surprise of many, including his own ministers.
Among the concerns high on the G-20 agenda was the potential for Greece's woes to spread to major European economies like Italy, where Prime Minister Silvio Berlusconi is struggling to gain support for austerity measures and may face his own confidence vote next week. Borrowing costs for his government continue to rise amid the uncertainty.
Berlusconi said Friday that Italy had agreed to let the International Monetary Fund "certify" its reform program, a step designed to boost investor confidence.
European markets turned sour as of lunchtime on Friday, following a slightly stronger opening. U.S. stocks dipped on the back of a disappointing jobs report.
Lawmakers in Greece debated the confidence motion for a third day Friday before a vote expected after midnight (6 p.m. ET).
Under a motion of confidence, lawmakers signal to the head of state whether the government has the support of parliament. A loss typically results in the government's dissolution and the holding of a general election unless the head of state asks someone with more support to form a government.
Papandreou's own party appeared divided on his fate hours ahead of the vote, with some telling members of the Greek news media that they hoped he would win the vote but then step down to allow a government of national unity to be formed.
Speculation had been rife Thursday that Papandreou might resign, or that a unity government might be formed with a different leader at its head who could find consensus on how to handle the crisis.
The prime minister backed off from his proposal to hold a referendum, saying it would not be necessary if the opposition were to support the tough austerity measures that accompany it.
Opposition leader Antonis Samaras responded that he would support the bailout but wanted Papandreou to step aside and for early elections to be held.
"We are asking you to resign to give power to people to negotiate new measures," he told the prime minister.
"It's nothing that I can rule out, and I'm not clinging to any chair," Papandreou said about the prospect of giving up his job. "That's the political cost I'm taking on, me personally, for something which I did not cause."
Papandreou said he was not interested in being re-elected, only in saving the country from economic disaster should Greece default on its debts.
"Everything is on the table," Papandreou said. "Well, the government will be. But let's talk about it. Let's debate it. You don't expect -- out of the blue -- for a government to resign. That would be irresponsible."
He called on Samaras "to come back to the room and participate in this conversation about forming a government, of a wider support for the good of the country."
European Commission President Jose Manuel Barroso told CNN that a default for Greece would be "dramatic, severe and painful for the population" but that Europe would do what it could.
The package would wipe out 100 billion euros of Greek debt and comes with the promise of 30 billion euros from the public sector to help pay off some of the remaining debt, making the whole deal worth 130 billion euros ($178 billion).
But it would require Greece to slash government jobs, privatize some businesses and reduce pensions.
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