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Greece warned Thursday it could turn to the IMF for help unless European leaders offered financial aid next week, as doubts over plans to rescue Athens from its debt crisis rocked the euro.

Greek Prime Minister George Papandreou urged the European Union to help a "family" member as the interest rate Athens pays to borrow money on the bond market shot up amid investor uncertainty over Europe's willingness to help.

Germany, which has been reluctant to give Greece a bailout, appeared to be warming up to the idea of letting Greece seek a bailout from the International Monetary Fund.

"We would be open to an intervention from the IMF if that should become necessary," said a German government 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 crippling debt and a yawning public deficit, Greece has had to pay a high price on financial markets to borrow critically needed funds.

The yield on 10-year Greek government bonds rose sharply to more than 6.25 percent on Thursday, reversing recent easing and reflecting renewed investor disquiet that European efforts to resolve the crisis were stalling.

The turmoil also took a new toll on the euro, which sank to 1.3602 dollars in late trading in London from 1.3735 on Wednesday.

"Comments from Germany that Greece should look to the IMF for assistance highlight the uncertainties that remain about the form and timing of any Greek bailout," said economist Ben May at British consultancy Capital Economics.

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 (EU) 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.

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.

Papandreou 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 budget cuts.

"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.

AFP