Greek party leaders have agreed to name Lucas Papademos, a former European Central Bank vice-president, as prime minister of a new interim government until early elections, according to the president's office.
Papademos, 64, was seen by many, both inside Greece and internationally, as the best choice to steer Greece through its worst post-war economic crisis due to his technocratic credentials and perceived financial expertise.
"The president, after recommendations by political leaders who attended the meeting, has instructed Lucas Papademos to form a new government," Greek President Karolos Papoulias' office said in a statement after talks between political leaders and Papademos on Thursday.
George Papandreou, the outgoing prime minister, earlier met key political leaders for negotiations at the presidential mansion in Athens, after which the group announced that the new government would be sworn in on Friday.
In his first comments as prime minister, Papademos, a former head of the Greek central bank, said the country was at a crucial crossroads and pledged to keep it within the euro single currency bloc.
"The Greek economy is facing huge problems despite the enormous efforts made ... The course will not be easy," he said.
"I am convinced that the country's participation in the eurozone is a guarantee for monetary stability. We must all be optimistic about the final result, as long as we are united."
'Collective sigh of relief'
Papademos will lead a coalition until elections which are expected to be held in February, and his mission for the three-month term is no less than saving Greece from bankruptcy.
At best, the hope is that Papademos' experience of global financial circles and his non-involvement in the partisan politics of Greece will lend themselves to calm jittery markets and steer Greece towards stability.
Tony Saunois of the Socialist Party in Britain speaks about his impressions of Papademos
Papademos was the governor of the Bank of Greece from 1994 to 2002 and vice-president of the European Central Bank from 2002 to 2010.
Al Jazeera's Andrew Simmons, reporting from Athens, said that the announcement caused "a collective sigh of relief across Europe", and Greece's stock market had jumped sharply when Papademos arrived at the presidential palace to begin talks with the head of state and political leaders.
His appointment was held up for four days amid political squabbling and over demands he reportedly made about holding elections later than the February date pencilled in.
The interim government will be entrusted with securing continued bailout funding and a new $177bn rescue package for Greece from eurozone partners and the International Monetary Fund.
Greece will run out of money next month unless the new government reaches an agreement on emergency funding. Other eurozone nations have refused to give Greece its latest installment of bailout cash, $11bn, until the country approves a second bailout deal, which took European leaders months to hash out.
But Papademos' government faces the challenge of balancing the need for international rescue funds with the grievances of a Greek population already feeling the pain of several rounds of austerity cuts demanded by creditors as the price for bailout loans.