France and Germany have agreed on a framework to aid debt-stricken Greece, with President Nicolas Sarkozy bowing to Chancellor Angela Merkel's demand for an International Monetary Fund role in any potential rescue.
The contingency plan - hammered out by the two leaders before the start of a two-day European Union summit in Brussels - calls for IMF funds in addition to bilateral loans to Greece.
It provides a coordinating role for the EU, according to aides.
"I believe that now we are quite near," Finnish prime minister Matti Vanhanen said today 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 tomorrow.
Asserting her clout as head of the European Union's largest economy, Ms Merkel pushed for the IMF to be brought in, while counterparts, including Mr Sarkozy, said Europe should show its credibility by fixing the crisis on its own with loans to Greece.
Ms Merkel faces public opposition to any bailout for Greece before a regional election in May and fears any financial assistance would face a legal challenge at home.
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.
Greece says it needs only a standby aid package to reassure nervous financial markets and that it can get by without having to resort to using the money that is set aside for it.
However, Goldman Sachs Group estimated today that Greece may ultimately get aid from the IMF worth about €20 billion over 18 months.
EU leaders are also concerned debt-servicing problems could also hit other countries in the euro zone including Portugal, Spain or Italy and fear the unity of the 27-country union, which represents 500 million people, will suffer long-term damage.