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Greek Prime Minister George Papandreou on Wednesday refused to rule out an appeal for aid to the IMF, if European backing is insufficient to resolve its debt crisis.

"If we realise that we indeed will be borrowing at extremely high rates... there are other options," Papandreou told reporters in Brussels after talks with the head of the European Commission, which is supervising deficit reduction measures.

"Nothing is excluded," Papandreou said having been asked whether seeking recourse to the International Monetary Fund remained a live threat, following earlier comments from a government spokesman in Athens to that effect.

"But we would certainly prefer a European solution," he said in a pointed remark days from a summit of European Union leaders, who are required to press the button on loan assistance agreed in principle among eurozone partners, should Greece require it.

"All options are open, but we would expect that the EU and in particular the eurozone can deal with this possibility," 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 budget deficit of 12.7 percent of output and debts of nearly 300 billion euros (411 billion dollars).

The EU and the European Central Bank have made clear that an approach to a body outside EU institutions would be unwelcome.

Papandreou reiterated that "there is no possibility of Greece leaving the eurozone" and stressed that Athens has not asked for financial assistance, saying progress towards meeting those targets is "well ahead of schedule."

He stressed, though, that action to help Greece drive down interest rates for its re-financing needs held the key.

He said high bond yields, despite falling to just above six percent in the last two weeks from almost seven percent, presented "not only an economic but also an ethical problem."

EU ministers on Tuesday endorsed Greek plans to curb spending and approved the use of emergency loans to Greece but only as a contingency in the event that default is considered an imminent threat.

European diplomatic sources have said Greece was seeking 20-25 billion euros through eurozone aid.

Commission chief Jose Manuel Barroso said Greece was "in a calmer situation now" than over recent weeks, adding that his body would present firmer proposals next month on a short-term mechanism allowing eurozone nations to coordinate loans to help a partner in trouble.

Nevertheless, German Chancellor Angela Merkel warned earlier on Wednesday that Europe still needs a longer-term "treaty framework in which it would even be possible as a last resort to exclude a country from the euro if it again and again breaks the conditions over the long-term."

AFP