Greece will hold new elections after politicians failed to form a government, nine days following an inconclusive vote.
The move prolongs a political crisis that pushes it closer to bankruptcy and exit from the euro.
After a third day of failed talks with political leaders, a spokesman for President Karolos Papoulias said the process of seeking a compromise had been declared a failure.
He did not immediately give the date for the new vote, but elections rules suggest it will be in mid June.
A caretaker government would be formed tomorrow, the spokesman said.
Greece remains without a government since its inconclusive election left parliament split between supporters and opponents of a €130 billion bailout package reviled by Greeks for imposing deep wage, pension and spending cuts.
Polls show the leftist SYRIZA party, which rejects the bailout and placed second in last week's vote, is now on course to win, a result that would give it an automatic bonus of 50 seats in the 300-seat parliament.
European leaders say that they will cut off funding for Greece if it rejects the bailout agreed in March, which would mean bankruptcy and all but certain exit from the European single currency.
Tánaiste Eamon Gilmore has said the political situation is Greece is "very worrying".
Speaking to reporters in Dublin this morning, Mr Gilmore said it has created further uncertainty in Europe.