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Greece warned on Thursday it could call on the IMF for help unless European leaders offered financial aid next week, with Germany now appearing "open" to the idea as the Greek debt crisis hit the euro.

After Greek Prime Minister George Papandreou urged the EU to help a "family" member, German government sources said Berlin was warming to the idea of allowing Greece to seek a bailout from the International Monetary Fund.

"We would be open to an intervention from the IMF if that should become necessary," said one source.

A German finance ministry spokesman stressed that "there is no need to take a decision" at present as "the issue of financial aid to Greece has not arisen."

However, the Financial Times reported that Berlin had concluded there were legal obstacles to plans for eurozone countries to offer bilateral loans because EU treaties expressly forbid such bailouts.

Saddled with debt and a huge public deficit, Greece has had to pay a heavy price on financial markets to borrow critically needed funds.

That rate rose sharply on Thursday, reversing recent easing and reflecting renewed investor disquiet as European efforts to resolve the crisis appeared to flounder.

The turmoil has also taken a toll on the euro, which on Thursday fell sharply to 1.3685 dollars in late trade from 1.3735 on Wednesday.

An agreement this week among eurozone finance ministers to help Greece if they fear imminent default on debts had already looked like unravelling after hawkish comments from German Chancellor Angela Merkel.

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

Britain and Sweden already back the idea of Greece turning to the IMF, the Washington-based global lender of last resort, while European sources said that Finland and the Netherlands were also receptive.

The Dutch interim government was to report to its parliament late Thursday, where a motion directing the Netherlands to "promote the IMF option" was passed last month.

In Washington, the IMF said it had not been approached but was in close contact with the European Commission.

A Greek official told Dow Jones Newswires that Athens could go to the IMF as early as the April 2-4 Easter weekend.

Papandreou said the European Union had "an opportunity to make a decision next week at the (European Union) summit," one "we should not miss."

"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'."

He said that "nothing is excluded" when asked about the IMF avenue but maintained that Europe was "a family of values, with solidarity with each other" and called for "strong political support" to "make sure that we are not going to pay more than necessary" to borrow on international markets."

Papandreou stressed that Greece was "not asking for money from Germans, French, the Italians or other workers or taxpayers" but wanted instead a "loaded gun" to ward off speculators.

He told the EU parliament that Greece was "basically under an IMF programme, whether it?s called that or not," in reference to strict orders to impose tough structural adjustments.

"We don?t have, on the other hand, facilities that the IMF would give," in other words, the money.

A commission spokesman said it was "natural, logical and even prudent" for Greece to keep all options open, while expressing the hope that the EU summit would "bear fruit" next Thursday and Friday.

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.

Greek bond yields had fallen 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 benchmark German Bund was at 3.102 percent by comparison.

AFP