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Greece's coalition government lost its smallest partner on Friday after emergency talks failed to break a deadlock caused by the dramatic closure of state broadcaster ERT last week.
But fears of early elections dissipated after the coalition's second largest partner, the socialists, said earlier they would continue to support the year-old government.
Antonis Manitakis, the outgoing minister of administrative reform, confirmed that the moderate Democratic Left party was abandoning the conservative-led administration of Prime Minister Antonis Samaras.
"Following the party's decision to withdraw from the government and withdraw its ministers I will table my resignation to the prime minister," Manitakis told reporters after a marathon party meeting.
The Athens stock exchange, which had opened with a 2.6-percent drop, accelerated its fall to 3.3 percent on the news as the opposition charged the debt-strapped government had been weakened.
The pullout means that in addition to Manitakis, the minister of justice and deputy ministers for health and education need to be replaced.
Socialist leader Evangelos Venizelos had earlier taken a swipe at the moderate leftists for abandoning the government.
"It is clear that when we share a responsibility, we all share alike," Venizelos said after the late-night government talks.
"You can't pick and choose," Venizelos said.
Late on Thursday, Democratic Left leader Fotis Kouvelis said he had disagreed with conservative Prime Minister Antonis Samaras' handling of ERT's closure.
"We disagree with actions that offend legality," Kouvelis had said after last-ditch talks with Samaras and Venizelos.
Samaras, who was just one year into his four-year term, has pledged to fight on to enact unpopular austerity reforms demanded by Greece's international creditors.
"No one wants elections right now. Today we have marked one year as government and we will do our full (four-year) term," Samaras said in a televised address after failing to win over Kouvelis.
The pullout of Democratic Left, which has 14 deputies in the 300-seat parliament, leaves the conservatives and socialists with a combined strength of 153 MPs, just enough to keep control of the chamber.
The two allies are also hoping to draw support from a group of another 14 independent MPs -- most of whom were once part of their own parties -- to push further reforms through parliament.
Samaras said that he also hoped for the continued support of Democratic Left even outside the government "but we will move forward either way," he added.
"The government comes out weakened from this situation, caused by Samaras' extreme and undemocratic decisions on ERT," said Dimitris Papadimoulis, parliament spokesman for the main opposition party Syriza.
Thursday's meeting of the coalition partners was the third effort this week to break the political deadlock over the state broadcaster.
Samaras angered his coalition partners more than a week ago when he unilaterally shut down ERT, which he wants to turn into a smaller broadcaster and cut what he considers waste.
Concerned over the latest political developments, the European Union called on the country's leaders to act responsibly.
The shutdown has taken ERT's five TV channels and 24 radio stations off the air and will result in the loss of nearly 2,700 jobs.
Greece is under pressure by its EU-IMF lenders to axe 4,000 civil servant posts by the end of the year, as part of its massive 240-billion-euro ($318 billion) bailout.
But on Thursday, the International Monetary Fund denied it had recommended the broadcaster's shutdown.
Samaras has rejected calls to reinstate ERT in its previous form: he says it cost 300 million euros a year for an overall viewer rating of four percent, less than half that of its private competitors.
Samaras has offered to compensate ERT's employees and to create a new broadcaster with less than half the workforce.
ERT was widely seen in Greece as a government mouthpiece and a haven of chronic mismanagement.
But it also offered educational content unavailable on private television, and a link to the homeland for the country's large diaspora.
ERT's closure has also provoked criticism from international media organisations, which have condemned its shutdown as undemocratic.