The wrangle over the Greece parliament continues as the leftist Syriza party, which is seen as the favourite to form the government, failed to stike a deal with the coalition partners.
The leftist leader Alexis Tsipras ruled out the possibility of doing a deal with the two major parties New Democracy and Pasok who secured the first and third places respectively in Sunday's elections.
The crisis could even lead to the expulsion of the country from Europe's single currency bloc.
Leader of Pasok party, Evangelos Venizelos, made it clear that he would only join the government which is pro-euro and pro-Europe. Leftist prime ministerial candidate Tsipras rejected the idea of the current EU-backed loan agreement.
"The pro-bailout parties no longer have a majority in parliament to vote in destructive measures for the Greek people. The popular mandate clearly renders the bailout agreement invalid," said Tsipras.
The New Democracy leader also failed to extend support to the leftist party.
"Mr Tsipras asked me to put my signature to the destruction of Greece. I will not do this. The country cannot afford to play with fire," Reuters quoted New Democracy leader Antonis Samaras as saying.
This leaves the Syriza party with the only option of collecting the support of the remaining parties which seems improbable.
The current situation could possibly lead to another election in the next few weeks.
"After Samaras's response to Tsipras today, that particular bridge [the chance of a coalition deal between these parties] has been exploded, burned," said political analyst Theodre Couloumbis.
The money in the country will run out by the end of June and this political stalemate will only worsen the situation.
Emotions are also running high among the people. "They are all saying they don't want to cooperate with anyone else. What does this show? All they care about is being prime minister, nobody cares about the country," Vasilia Konidary told Reuters.
If the Syriza failed to form a government, the third-placed Pasok will be given a chance to form the government. Fresh elections will be held if Pasok also will fail.
Asian and Australian Markets Fear 'All Hell Will Break Lose'
Asian stock markets fell, spooked by disappointing U.S. corporate earnings and fears that political turmoil in debt-crippled Greece is pushing it closer to financial disaster.
Japan's Nikkei 225 index fell 1.5 percent to hit a three-month intraday low of 9,021.20 as traders pulled away from big exporters whose fortunes are partly linked to demand from Europe.
The same went for shares in other export-driven economies such as China and South Korea. Hong Kong's Hang Seng fell 1 percent to 20,284.66 and South Korea's Kospi lost 0.9 percent to 1,950.68.
Australia's S&P/ASX 200 slipped 1.2 percent to 4,262.30 after falling prices for metals hurt mining shares. Benchmarks in mainland China, Singapore and Taiwan also fell.
Markets have been increasingly volatile since Greek voters last weekend rejected political parties that imposed the deep spending cuts required in exchange for bailout money to keep the country from bankruptcy. On Tuesday, left-wing politician Alexis Tsipras said the country was no longer bound by its promises to cut spending sharply.
But a failure to keep those promises could lead international lenders to cut off rescue funding. That would likely lead Greece to default - and to the exit door of the euro common currency.
"If Greece repudiates the agreement signed by the previous government, the most likely scenario is Greece will default," said Francis Lun, managing director of Lyncean Holdings in Hong Kong. "And then all hell will break loose, and Greece will get kicked out of the eurozone. It's like the end of the world for the eurozone."