Europe turns towards IMF fix for Greece

Days from a European Union summit, Germany officially declared its openness to an IMF appeal, an unprecedented move by a eurozone country, while the Netherlands and Finland also diverged from a pact reached just days ago.

Investors reacted negatively to the shifting political sands, with Greek government bond yields — the interest rate that Athens must pay in order to raise money on financial markets — rising sharply.

The EU's budgetary overlord, Olli Rehn, said national leaders had to come to a “specific political conclusion” and clarify the way forward “next week,” having compared notes with IMF chief Dominique Strauss-Kahn, who has been in town for days.

Greek Prime Minister George Papandreou used a two-day visit of his own to push heavily for national leaders to help his country borrow more cheaply when they gather in Brussels next Thursday and Friday.

Greece has made it clear that it could not meet its borrowing requirements at current rates while at the same time adhering to strict EU demands to slash its huge public deficit.

In a pointed sign, a diplomatic source said it was unlikely that EU president Herman Van Rompuy would find sufficient support to place the Greek troubles on the formal summit agenda.

“The German government does not rule out aid from the IMF if Greece requests it,” spokesman Ulrich Wilhelm said at a news conference after reports that Berlin was concerned European aid for Greece could break German and EU law.

France has previously opposed the idea of Greece going cap in hand to the International Monetary Fund.

“Time is running out” for definitive action, said Ulrich Leuchtmann, an analyst at Germany's Commerzbank, as Greece needs to raise some 20 billion euros (27 billion dollars) from international debt markets over the next two months.

In afternoon London trade, the European single currency tumbled to 1.3567 dollars from 1.3603 late in New York on Thursday.

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