Merkel backs IMF

In an address to the German parliament on Thursday, German Chancellor Angela Merkel outlined her support for International Monetary Fund assistance to try to solve Greece's debt problems - and urged other European leaders to change their minds on the issue.

"Europe can not face this crisis alone," said Merkel.

The German Chancellor said she would only support EU financial assistance if it was with additional support from the IMF. However she said this should occur as a "last resort."

During her statement, Merkel also outlined Germany's wishes for further sanctions for countries that break budget rules. She said Greece had shown how vulnerable the EU was to economic mismanagement in a single country. She stressed that Europe "could not afford to water down the Stability Pact."

Merkel added that Germany was committed to the EU, saying that the countries "together were stronger."

France-Germany divide?

Ahead of Thursday's EU summit, European leaders are divided on how aid can best be pledged to support Greece - and other EU countries that may face financial troubles in the future.

Offering direct financial assistance to Greece is an unpopular move in Germany, as many German taxpayers believe they already contribute enough to the EU.

Merkel's pro-IMF stance has set a clear distinction between Germany and other EU countries, including France, who have said any financial support for Greece should come from within the European Union.

European Commission President Jose Manuel Barroso has urged leaders to come to an agreement swiftly in order to boost market confidence in the euro zone.

The pressure to lay out a plan at the summit was heightened on Wednesday, as rating agencies downgraded Portugal's debt. Nervous markets then plunged – sending the euro to a 10-month low.

cb/dpa/Reuters
Editor: Matt Hermann