Greek prime minister George Papandreou kicked off today by backing away from the referendum on the European bailout that he proposed just two days ago. And in a speech to the Greek parliament, the country’s finance minister echoed that message, saying the bailout should be categorically ruled out. But it’s not a done deal yet: to avert a referendum, it appears that Papandreou must go through negotiations with his opposition party. Obama called solving the European debt crisis the “most important” task at hand for the G20 summit, underway now in France. At least the markets are reassured that the referendum appears to be off: they spiked today.

And even if that does happen, and the referendum is averted, Greece still isn’t in the clear: Papandreou faces a no confidence vote in parliament tomorrow. Papandreou’s foreign minister is confident that the prime minister will get a “Yes” vote. But most observers aren’t, as some members of Papandreou’s socialist party, Pasok, have begun to desert him.

All the action in Greece has overshadowed some looming challenges in Italy, where borrowing rates have hit new highs. and Prime Minister Silvio Berlusconi faces mounting pressure to resign.