France and Germany agreed on a framework to aid debt-stricken Greece, with Nicolas Sarkozy bowing to Angela Merkel’s demand for an International Monetary Fund role in any potential rescue.

The contingency plan hammered out by the French president and German chancellor before a European Union summit on Thursday in Brussels calls for IMF funds in addition to bilateral loans to Greece. It provides a coordinating role for the EU, according to their aides who spoke to reporters on condition of anonymity because the agreement has yet to be approved.
“I believe that now we are quite near,” Finnish Prime Minister Matti Vanhanen said in a Bloomberg Television interview as the French and German leaders met. “It might be some type of combination of bilateral arrangements and IMF participation.” He declined to speculate whether the EU will make a final decision at the summit, which ends Friday.
Asserting her clout as head of the European Union’s largest economy, Merkel pushed for the IMF to be brought in, while counterparts, including Sarkozy, said Europe should show its credibility by fixing the crisis on its own with loans to Greece.
Signs that Greece may win a financial backstop gave a lift to Greek bonds and nudged the euro up from a 10-month low. The European Central Bank contributed to the rally by announcing a policy reversal ensuring that Greek debt won’t be struck off its collateral list next year.
(Source: Bloomberg)