The European Union is moving closer to allowing Greece to apply for aid from the International Monetary Fund (IMF), according to media reports. The news comes ahead of a summit of EU member countries on Thursday and Friday.

The prospective deal would give the IMF a leading role in providing loans to debt-stricken Greece, but individual euro-zone countries could provide loans to make up any gaps in aid.

If approved, such a deal would be a victory for Chancellor Angela Merkel, who has been pushing for the IMF to play a role in resolving Greece's problems.

France warming to IMF involvement?

France, on the other hand, initially opposed the fund's involvement, but French President Nicolas Sarkozy appears to have come round to the idea, according to the Sueddeutsche Zeitung newspaper.

Paris was at least considering the option, the paper wrote. It quoted government sources as saying that Paris and Berlin were working towards "finding a solution for Greece before the EU summit starts."

German Finance Minister Wolfgang Schaeuble, who was initially against IMF involvement, because it would mean the EU admitted to needing help from outside, was also warming to the concept.

Merkel and Schaeuble were reportedly calling for a new European system to be established that would involve strict conditions for any help for countries like Greece, such as tougher sanctions for breaching deficit rules.

The declaration would, however, not specifically refer to Greece, instead laying out strict conditions for any ailing euro-zone economy, German daily Die Welt reported.

But a government spokeswoman told Reuters that Chancellor Angela Merkel "had made no commitment to agree to such a declaration of the Eurogroup on Thursday."

Germany has been adamant about not using taxpayer money to bail out Greece, saying that Athens has not asked for money.

Greece has, however, asked for back-up in the form of promises that it will not be left hanging if it is unable to secure credit for loans that come due.

Tough love

Greece has some 16 billion euros ($21.6 billion) in loans that will mature between April 20 and May 23. The country hopes that a show of financial support from its currency compatriots, even if not redeemed, would be enough to secure better refinancing terms.

A senior German official quoted by Reuters identified several conditions necessary for Berlin to agree to any aid mechanism: Greece would have to be unable to access credit markets, the IMF would make the primary contribution to aid, and EU members would have to agree to "additional instruments" to keep their budgets in line.

"The message from Berlin is crystal clear really, which is that Greece still needs to continue not just with consolidation but to test the markets out and if necessary use the IMF," Barclays Capital Chief European Economist Julian Callow told Reuters. "The implication is that Germany will support Greece only if the IMF channel does not deliver."

svs/ng/Reuters/dpa/AFP
Editor: Nancy Isenson