Greece has made what amounts to an ultimatum to the European Union to come up with a clear offer of standby loans next week or face the embarrassment of Athens asking the International Monetary Fund for help. Greece has long held out the prospect of seeking IMF help to put pressure on the EU, but Prime Minister George Papandreou raised the stakes Thursday by calling for a firm pledge of financial support at an EU summit in Brussels on March 25-26. His appeal is designed to force EU leaders, and particularly German Chancellor Angela Merkel, to rally behind Greece after EU finance ministers offered only a vague plan for a standby safety net this week. But success is far from certain for Athens. “The position of the German government will be decisive. Right now it looks like they will really not reach agreement at European level on help for Greece,” said Cinzia Alcidi of the Center for European Policy Studies think tank. “This would be harmful in terms of the credibility of the euro and it would be politically embarrassing. This is the first big test for the euro and it will look bad if the Europeans can't find a way out of trouble on their own.” Greece's threat of turning to the IMF is a potent one. Other countries in the euro zone are horrified by the prospect because it could be seen as a sign of weakness. None of 16 countries using the euro has needed a bailout since the single currency was created a decade ago, and EU leaders are still hoping Greece will get by on its own after announcing austerity measures to cut its deficit. “Many people said when they created the euro that they would face problems. There's a fear that these people will be able to say they have been proved right if the IMF is called in,” said Zsolt Darvas of the Bruegel think tank in Brussels. Papandreou's comments Thursday, delivered during a visit to Brussels, increased pressure on his EU colleagues to take a decision they have appeared keen to avoid. EU finance ministers have declined to say when a final aid move for Greece might be made and a German government spokesman said Tuesday that Berlin did not expect any decision to be taken at the EU summit. European diplomats say EU President Herman Van Rompuy is reluctant even to discuss the issue at the meeting. But pressure for action has also mounted because the vagueness of the standby plan has done little to convince financial markets that Greece can count on euro zone help, and the punitive premium Athens has to pay to borrow on the market over benchmark Germany has remained unsustainably high. Prospects for agreement on an aid package, however, are clouded by political concerns, above all in Berlin. Germany, Europe's biggest economy, would be the linchpin of any European support for Greece but is reluctant to bail it out or to rush into anything before Athens shows it is willing to take the painful steps needed to fix its finances. “There is no need for decisions,” Finance Minister Wolfgang Schaeuble told German parliament this week. “But in a way of last-resort thinking, we must be ready to act.” Opinion polls show a majority of Germans oppose stumping up the money for a bailout and Merkel took a tough line in parliament on Wednesday, backing calls for steps allowing countries to be expelled from the euro zone if necessary. Any decision to back aid would be politically difficult for her, especially as any euro zone bailout could face a legal challenge in Germany. Some EU states also resist any approach to the IMF because it could be seen as a way for Washington to make its influence felt in Europe, and are worried the international lender would not offer a lasting solution to Greece's problems anyway. But the EU's options are limited if its leaders do not agree on a package of aid that would be ready for Greece to tap if necessary. Proposals to create a European monetary fund have divided opinion and come too late to help Greece. Some economic analysts say the IMF is now the only option because a credible outsider is needed to monitor compliance with any aid programme after Greece acknowledged lying to the EU over its economic statistics. “The only credible voice left with the capacity to act is the IMF,” economists Simon Johnson and Peter Boone wrote in a blog. European diplomats say there are now some cracks in the wall of euro zone opposition to calling in the IMF, with Italy, Finland and the Netherlands increasingly open to the idea. Government sources say Germany is also now less hostile. “In the end it will be a question of political will,” said Alcidi. “But if there is no political will, it is probable that Greece will really go to the IMF.”
