Merkel's hardball was picked up in Greece by Prime Minister George Papandreou, who reminded other Eurozone members that they had not yet come up with a viable alternative.
According to The Times Papandreou sent a thinly veiled threat to the EU he might consider turning to the International Monetary Fund for help:
European leaders were urged today by the Greek Prime Minister to come up with a clear bailout plan at their summit next week or face the embarrassment of Athens seeking cash from the International Monetary Fund.Papandreou is in Brussels today, so expect more news to come.
George Papandreou said that he expected the Eurozone “family” of 16 countries to support his drastic austerity programme by announcing how they will save Athens from a default on its sovereign debt.
In a thinly veiled threat, he said that Greece was already carrying out measures that satisfied the IMF, signalling that he will ask for the Washington-based organisation’s cash if no European aid is agreed.
He seems to be playing a game of brinkmanship to try and secure a potential Eurozone rescue at preferential rates, or at least to use the threat of the IMF to force a bailout plan onto the table to try and calm markets.
The proposed European Monetary Fund appears to be off the table, with no further advances and ECB President Jean-Claude Trichet distancing himself from the "monetary" in the EMF. He would prefer "monetary" be replaced with something like "fiscal" or "budget." The idea of German Finance Minister weas also heftily opposed by the German Bundesbank.
The Times report led to a reprieve from the Greek side. The Wall Street Journal quoted an anonymous Greek official who denied a Greek-IMF solution - for now:
The Greek Finance Ministry Thursday denied reports that the country might seek support from the International Monetary Fund next month amid growing doubts over a European Union-backed bailout package for the country.As EU leaders left a 2-day meeting on Monday and Tuesday with nothing else than the agreement to come up with a solution at the next summit by the end of March, an excuse heard often before in this crisis, Mr. Market took action: The Euro reversed its short term strength and trades a penny lower than on Wednesday. Greek CDS jumped from 290 to 296 basis points.
"These reports are jokes, they are not true," said the official requesting anonymity. "These reports do not correspond with reality."
The official said Greece may approach the IMF as early as the Easter weekend of early April for support.
But the finance ministry official stressed that Greece hasn't officially sought financial support from the EU, reiterating that Greece has only requested political support from its partners.