Germany signalled for the first time today that it may accept European financial aid for Greece as a last resort, but only if the IMF is involved and euro zone partners accept tougher budget discipline rules, according to dpa. A senior German official spelled out Berlin's conditions for any aid mechanism ahead of an EU summit starting on Thursday: * Greece would have to be unable to access credit markets; * The International Monetary Fund would have to make a "substantial contribution" to any rescue; * European Union states would have to agree to negotiate "additional instruments" to enforce budget discipline, beyond existing rules that failed to prevent Athens running up huge debts and deficits that have shaken the euro zone. A source in Chancellor Angela Merkel's conservative bloc quoted her as telling lawmakers Germany would only agree to a rescue model combining bilateral and IMF assistance. There would be no decision at this week's summit but a special EU summit would be called to decide if an emergency arose. "The condition for action, as a last resort, is that Greece's financing on the capital markets is exhausted," the senior official said. "There are first signs from various capitals that people could envisage financial co-assistance by the IMF," he said. European diplomats said France and Germany, co-founders of the single currency, were working on a joint position on Greece for the summit, including a possible role for the IMF, which Paris has hitherto rejected as anathema inside the euro family. One source said Paris and Berlin had not yet reached a common position and the talks were "very sensitive". European Central Bank President Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker have said involving the Washington-based lender would send a damaging message that the euro zone was incapable of handling its own problems. Some senior French policymakers have said it would be a severe political setback for European integration. "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," said Julian Callow, Chief European Economist at Barclays Capital. "The implication is that Germany will support Greece only if the IMF channel does not deliver," he said. Greece needs to refinance some 16 billion euros in maturing debt between April 20 and May 23 and is hoping that a public display of an EU emergency support mechanism, which would not need to be activated, will be enough to force down the cost. The crisis over Greece's debt, expected to hit 120 percent of national output this year, and its budget deficit, which reached 12.9 percent of GDP last year, has shaken confidence in the euro single currency.
