German Chancellor Angela Merkel is insisting that any European bailout for Greece be only a last resort and involve the International Monetary Fund, even as other eurozone officials call for a definite rescue plan at a Thursday summit.
Market worries over the lack of a safety net for a troubled member of Europe's currency union drove the euro down to $1.3325, its lowest level since May. A euro bought $1.51 in late November.
Merkel, leader of the EU's largest member state, voiced strong opposition to an easy bailout program for Greece at the German parliament, saying she could only allow aid in an "exceptional emergency" where Greece was unable to borrow from bond markets.
However, three other eurozone leaders said they expected a two-day meeting of European Union leaders to come to a deal to help Greece overcome its debt crisis.
Spanish Prime Minister Jose Luis Rodriguez Zapatero said "it is our job to find a European solution to Greece's problems." Luxembourg's Jean-Claude Juncker said he was "convinced there will be a mixed solution of IMF involvement and bilateral aid" from individual eurozone nations.
Greek Prime Minister George Papandreou told reporters that the Thursday meeting was "a very difficult and important day for Europe ... it is a challenge for Europe to show its intention to support the euro, the common currency."
He said he was confident that EU leaders would make a decision to help his country. EU Commission President Jose Manuel Barroso also said it would be "unthinkable" for EU leaders to meet without striking a deal.
Greece has been able to borrow by selling government bonds, but only at high interest rates that Papandreou has said are crippling his efforts to plug a huge budget deficit. He is calling on European leaders to agree an aid plan at a two-day summit starting Thursday.
Merkel was not sympathetic, saying any plan should only kick in as a last resort when the stability of the euro is threatened and "if a euro state no longer has access to international financial markets," meaning when Greece could in practical terms no longer sell its bonds.
"The German government will push at the summit today and tomorrow that in an emergency, such help could come as a combination of IMF and bilateral aid within the euro zone," she said.
Germany sees itself as a fierce defender of prudent budget spending and is unwilling to use its taxpayer money to help Greece, which overspent and faked budget figures for years. Merkel also faces a key regional election May 9 which could damage her center-right government by overturning its majority in Germany's upper house of parliament.
Merkel claimed France would join Germany and "actively support a decision involving the IMF" and individual loans from eurozone nations. Spain's Zapatero said he saw no problem with IMF help.
France is softening its previous opposition to the IMF, hinting that it could support its aid as part of a European package.
The European Central Bank is fiercely opposed. ECB board member Lorenzo Bini Smaghi told German weekly Die Zeit on Thursday that market reaction showed that IMF involvement "could be damaging for the stability of the euro."
"If the IMF intervenes, the image of the euro would be that of a currency which is only capable of surviving with the support of an international organization where Europeans don't have a majority," he said.
The Washington, DC-based international lending agency has already bailed out three European Union members — Hungary, Romania and Latvia — but none use the euro. Calling in the IMF would underline the eurozone's inability to deal with the crisis on its own.
Europe's socialist party — which counts Spanish and Greek leaders as members — isn't keen either. The party's leader Poul Nyrup Rasmussen told reporters on Thursday that "if the only answer from Europe is to ask the IMF to help us then we are really, really, really poor."
The failure of the 16 euro nations to prevent Greece and other countries running up huge debts — or bail them out when they get into trouble — shows up the flaws in the way the currency is managed.
Merkel said eurozone nations need to learn the right lessons from the financial crisis and toughen sanctions against countries that run budget deficits above the EU limit of 3 percent of gross domestic product. She said it would be "disastrous" to abandon these rules.
"There must be an end to cheaters," she said.
Associated Press writers Raf Casert, Elena Becatoros, Debbie Seward, Gretchen Mahan and Robert Wielaard in Brussels, Kirsten Grieshaber and Geir Moulson in Berlin and Carlo Piovano in London contributed to this story.
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