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Eurozone urged to agree on Greece Merkel stands firm on IMF rescue
(about 3 hours later)
The European Commission president has called on eurozone countries to decide on help for the debt crisis in Greece. Chancellor Angela Merkel has told Germany's parliament she will insist that the IMF is involved if debt-ridden Greece needs to be bailed out.
Jose Manuel Barroso said the response was a test of EU leaders' commitment to financial stability as they start their two-day summit in Brussels. Before heading to an EU summit in Brussels, she made clear she would disappoint other countries, like France, which want a purely EU bailout.
But Germany, the largest economy in the euro-zone, is blocking a last-minute meeting of eurozone leaders. Mrs Merkel also said she would seek EU treaty changes to stop future crises.
It wants the International Monetary Fund to play a key role, and sanctions for countries that break budget rules. Germany has blocked a pre-summit meeting of eurozone leaders to discuss the Greek crisis.
It is not formally on the summit agenda but Greece is on everybody's mind. Berlin apparently believes there is no point in such a meeting because a deal is not imminent.
With German taxpayers fiercely opposed to bailing out the debt-ridden country, Chancellor Angela Merkel wants the IMF to take the lead in a joint package with the EU. 'Last resort'
It would be the first time a eurozone country is rescued from Washington and some fear that would further weaken the euro. Mrs Merkel fears that Germany would end up footing the bill if the EU funded the bail-out package itself.
Portuguese fears She wants the IMF to take the lead in a joint package with the EU, and tough sanctions for countries that break budget rules.
The president of the European Commission made an urgent appeal to EU leaders to create a safety net for Greece. Before heading to Brussels on Thursday she told the German parliament: "The German government will press for emergency aid combining IMF and joint bilateral aid from the eurozone but I say again, only as a last resort".
Their response, he said, would be a test of their commitment to European and monetary union. She said Greece was not insolvent, was acting to curb its deficit and was still able to raise money on international markets.
Mr Barroso happens to be a former prime minister of Portugal, whose debt was downgraded on Wednesday, in a move that heightened fears that the Greek crisis is starting to spread. She also said she would press for the EU to amend its treaties to strengthen its ability to prevent future budget crises.
To ease the uncertainty, France and Spain have called for a last-minute meeting of eurozone leaders before or during the EU summit. The Greek crisis is not formally on the agenda of the summit, which is officially concerned with the EU's 10-year economic strategy, and reinvigorating international negotiations over global warming.
But the Dutch prime minister described such a meeting as risky. But, says the BBC's Oana Lungescu in Brussels, it is Greece that is on everybody's mind.
And a senior German official insisted that any agreement would have to include tough conditions to avoid any future repeat of the Greek crisis. European Commission President Jose Manuel Barroso said it would be difficult to avoid the subject, and called on EU leaders to signal their commitment to the euro by reaching agreement on "a safety net" for Greece.
"What is at stake is the essential principle of financial stability that is at the centre of the euro, and the euro is the most important creation of the European project," he told the European Parliament on Wednesday.
Mr Barroso is a former prime minister of Portugal, whose debt was downgraded by a credit agency on Wednesday, in a move that heightened fears that the Greek crisis is starting to spread.
Costly debt
Some countries believe that only a swift and credible deal among eurozone nations can stem the uncertainty and restore faith in the single currency, which fell to a new 10-month low against the dollar on Thursday.
To that end, France and Spain called for a last-minute meeting of eurozone leaders before the summit, which is due to get under way on Thursday afternoon.
That prospect seems to have been rejected by Germany, which is not prepared to meet unless there is a deal ready to sign, says the BBC's Jonny Dymond in Brussels.
Diplomats said such a meeting could still take place on Thursday evening after the close of official business for the day.
German taxpayers are fiercely opposed to bailing out Greece, which is burdened by debt of nearly 300bn euros (£267bn, $407bn) and a public deficit of 12.7% of GDP - more than four times the official eurozone limit.
Greece has enacted unpopular measures to curb its deficit, and has signalled it is ready to turn to the IMF for assistance.
It is also having to refinance its debt. Because of doubts over its ability to pay, it is having to pay interest at about 6% - around double what Germany has to pay.