Euro drops as Greece ups stakes in EU debt row

(BRUSSELS) - Greece warned Europe on Thursday it may go to the IMF unless it gets concrete aid pledges from European leaders next week in a new confrontation over its debt crisis that is hitting the euro.

The yield on Greek government bonds, the interest rate that Greece has to pay over the long term to borrow money on international markets, also rose sharply on Thursday, reversing recent easing and reflecting investor concern.

Greek Prime Minister George Papandreou underscored dissatisfaction at the lack of help from the European Union "family" to deal with his country's crippling debt crisis, which has sparked wider worries about the eurozone.

There is "an opportunity to make a decision next week at the summit," Papandreou said in Brussels, after EU ministers left it up to national leaders to decide whether to approve a plan for eurozone nations to step in.

"This is an opportunity we should not miss," he stressed, saying Athens could not afford to rule out calling in the International Monetary Fund, the Washington-based global lender of last resort.

An agreement this week between finance ministers from the 16 countries that share the euro to back Greece if they fear imminent default looks increasingly in doubt after hawkish comments from German Chancellor Angela Merkel.

Britain and Sweden have already come out clearly in favour of Greece turning to the IMF, while European sources say that Finland and the Netherlands are not hostile to the idea, and that even Germany is not ruling it out entirely.

On Wednesday, Merkel made it clear that she wants eurozone countries that consistently fail to meet EU fiscal rules punished, with a future facility also allowing wayward members to be kicked out.

"We are a family of values, with solidarity with each other," Papandreou said on Thursday, calling for "strong political support" to "make sure that we are not going to pay more than necessary" to borrow money.

"What we're saying is this is where Europe must come in and say 'OK, in this case, we can either provide what an IMF would provide... or in the end Greece may have to choose the option to go to the IMF'."

Greek bond yields fell on hopes of an EU rescue earlier this week after brushing seven percent a fortnight ago.

But as market optimism faded, the yields on Greek 10-year bonds rose to 6.217 percent at 1100 GMT on Thursday, from 6.094 percent late on Wednesday. The yield on the German Bund was at 3.102 percent.

Papandreou stressed that Greece hd not asked for an immediate injection of hard cash but wanted a "loaded gun" to ward off speculators.

"We are not asking for money from Germans, French, the Italians or other workers or taxpayers," he underlined.

Athens has pledged to implement deep spending cuts and tax increases worth about 16 billion euros this year as it labours to slash a public deficit of 12.7 percent of output.

European Commission chief Jose Manuel Barroso said on Wednesday that his body would present firmer proposals "next month."

Dow Jones Newswires on Thursday reported a Greek official as saying Athens could go to the IMF during the April 2-4 Easter weekend.

SPRING EUROPEAN COUNCIL